Mighty China International Ltd v. China Resources and Transportation Group Ltd

HCA 1960/2021

[2025] HKCFI 4969

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1960 OF 2021

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BETWEEN

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JUDGMENT

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1.Introduction

1.1Mr Cheung Siu Yiu (“CSY”) and Mr Li Yongxiang (“LYX” or “D3”) are equal shareholders of the Plaintiff (“P”). The commencement of these proceedings was purportedly authorized by a written board resolution dated 31 December 2021 (“Resolution”) signed by CSY and his assistant Ms Chiu Ling Yan (“CLY”), ostensibly as the majority of P’s board of directors.

1.2Shortly after these proceedings were commenced on 31 December 2021, P filed a summons on 3 January 2022 for injunctive relief (“Injunction Summons”) against the 1^st Defendant (“D1”) and the 2^nd Defendant (“D2”) in respect of 754,912,330 shares (“Subject Shares”) which D1 allotted and issued to D2 on or about 28 December 2021. The injunctive relief sought was in summary as follows:

(1) As against D1, an injunction restraining it from allowing D2 (a) to exercise any rights attached to the Subject Shares and to dispose of the Subject Shares and (b) to dispose of the Subject Shares;

(2) As against D2, an injunction restraining it from (a) exercising any rights attached to the Subject Shares, (b) dealing with, disposing of or encumbering the Subject Shares, and (3) dealing with and/or disposing of any proceeds traceable to or derived from the Subject Shares;

(3) No relief was sought against LYX or Ms Zhang Hui (“ZH” or “D4”).

1.3The Injunction Summons was heard by Recorder Jin Pao SC on 7 January 2022. D2 and ZH were not present at the hearing[1]. At that time, LYX was represented by Messrs Chungs Lawyers (“Chungs”). As will become apparent below, LYX and ZH (collectively “Relevant Ds”) subsequently changed legal representation and their evidence, following the engagement of Messrs Jones Day (“Jones Day”) then underwent a substantial change. This feature, understandably, featured prominently during the trial before me.

1.4At the hearing on 7 January 2022, the learned Recorder granted interim relief pending the resolution of the Injunction Summons against D1 and D2 and ordered P to fortify its undertaking as to damages by making a payment into court of HK$5,000,000 failing which the interim injunction granted would not take effect.

1.5Importantly, as LYX had challenged whether the commencement of these proceedings was properly authorized, the learned Recorder ordered that the issue as to whether those suing on behalf of P had proper authority to sue (“Authority Issue”) should be determined as a preliminary issue in these proceedings and gave leave to the parties to seek directions from the court regarding the conduct of the preliminary issue.

1.6On 14 February 2022, LYX issued a summons for the further conduct for the determination of the Authority Issue. On 4 March 2022, DHCJ Man SC gave further directions, including an evidential timetable and an order that the Authority Issue be determined at a hearing before a judge in chambers to be fixed provisionally with 2 days reserved, depending on whether cross-examination was necessary. These proceedings were also ordered to be stayed pending the determination of the Authority Issue. As I understand the position, the substantive hearing was originally fixed to be heard on 2 and 3 November 2022. Pursuant to the evidential timetable, ZH 1^st and LYX 2^nd were filed respectively on 6 and 12 April 2022, the deponents then represented by Chungs. At the time when the subsequent round of evidence was filed by and for ZH and LYX, Chungs had been replaced by Jones Day and subsequent evidence was a marked departure from that set out in ZH 1^st and LYX 2^nd.

1.7On 19 August 2022, P issued a summons (“Cross-Examination Summons”) for an order that the identified deponents do attend court for cross- examination at the substantive hearing of the Authority Issue. On 10 October 2022, Ng J adjourned the Cross-Examination Summons for substantive argument and vacated the original trial dates.

1.8The Cross-Examination Summons was heard by DHCJ Le Pichon on 21 February 2023. By the learned Judge’s written decision dated 3 March 2023 (“Decision”), she granted leave to P to amend the Cross-Examination Summons and ordered that:

(1) LYX, ZH, Ms Lee Kai Ling (“LKL”) and Mr Wu Senhong (“WSH”) do attend for cross examination at the substantive hearing of the Authority Issue;

(2) The Relevant Ds be at liberty to cross-examine CSY and CLY at the substantive hearing of the Authority Issue if so desired.

1.9As noted in the Decision, LKL was at the material time a director of Soloman Investment Co Limited (“Soloman”), the company secretary of P. As regards WSH, it is common ground that WSH was allotted 1 share in P and appointed as one of P’s directors on 15 May 2020.

1.10This is my judgment on the Authority Issue. At the trial, (1) P was represented by Ms Gekko Lan (with Ms Lydia Leung) and (2) the Relevant Ds were represented by Mr David Chen (with Ms Clara Wong).

1.11It is relevant to note that, on 28 January 2022, LYX commenced HCA 133/2022 against CSY, CLY and P seeking, inter alia, a declaration that CSY and CLY had been removed as directors of P from 7 October 2021. On 19 May 2022, an order was made to stay HCA 133/2022 pending the determination of the Authority Issue in the present proceedings.

2.Background

2.1The matters set out in this section are largely taken from Mr Chen’s Opening Submissions with my supplements. Unless otherwise stated, the matters stated in this section are not disputed.

(i) P’s articles

2.2P’s articles of association (“P’s Articles”, each an “Article”) adopts the Model Articles in Schedule 2 to the Companies (Model Articles) Notice Cap 622H (in force as at 18 February 2019) (“Model Articles”, each a “Model Article”), save for certain modifications and save insofar as the Model Articles are specifically excluded or inconsistent with those provided in P’s Articles. For present purposes, the following provisions are relevant.

2.3As regards the appointment of directors:

(1) Article 18 provides: “The Company may, from time to time, by ordinary resolution appoint new Directors”;

(2) Article 20 provides: “The directors shall have power, exercisable at any time and from time to time, to appoint any other person as a director, either to fill a casual vacancy or as an addition to the Board”.

2.4As regards the termination of a director’s appointment:

(1) Model Article 25 provides (insofar as relevant):

“[25] Termination of director’s appointment

A person ceases to be a director if the person —

…

(d) resigns the office of director by notice in writing of the resignation in accordance with section 464(5) of the Ordinance;

…

(f) is removed from the office of director by an ordinary resolution of the company.”

(2) Section 464(5) of the Companies Ordinance Cap 622 in turn provides:

“If notice of the resignation of a director of a company is required to be given by the articles of the company… the resignation does not have effect unless the director gives notice in writing of the resignation -

(a) in accordance with the requirement;

(b) by leaving it at the registered office of the company; or

(c) by sending it to the company in hard copy form or in electronic form.”

2.5As regards the board’s decision-making process:

(1) Article 24(b) provides: “Unless otherwise determined by the Company by Ordinary Resolution, the quorum for meeting of the directors shall be two. Notwithstanding any provision herein, if the Company has only one director, the decision of that director shall be taken by way of written resolution(s)”;

(2) Model Article 9(3) provides: “[n]otice of a directors’ meeting must be given to each director, but need not be in writing”.

2.6As regards the company’s general meetings:

(1) Article 8(a) provides: “The quorum for the transaction of business at any General Meeting shall be two members present in person or by proxy. Notwithstanding any provision herein, if the Company has only one member, the decision of that member shall be taken by way of written resolution(s)”;

(2) Model Article 35(2) provides: “A general meeting other than an annual general meeting must be called by notice of at least 14 days in writing”.

(ii) Evolution of P’s corporate structure

2.7The company filings at the Companies Registry (“CR”) are not conclusive. Taken to their highest, they constitute written evidence of the view of the person(s) who prepared them: Lam Chi Ying v To Pik Ha, HCA 1930/2013, 17 July 2015 §46. The company filings cannot validate or otherwise authenticate a person's directorship or membership in the company if that person was not validly appointed as a director or accepted as a member in the first place. Any change in P's directorship and membership must, and could only, be validly effected in accordance with P's articles and the applicable law.

2.8Whilst the foregoing proposition is common ground between counsel, the company filings do at least provide a useful chronology against which the disputed matters on the Authority Issue are to be assessed.

2.9It is common ground that all the company filings set out below were prepared and presented to the CR by Soloman.

2.10P was incorporated on 18 February 2019. At the time when LYX acquired P, it was a shelf company with no prior business and no bank accounts.

2.11As shown in a Form ND2A, on 25 March 2019, P’s former directors, namely GRL19 Nominee Limited (“GRL19”) and one Ms Liu Zhi Yin, resigned and LYX was appointed as a director and Soloman the company secretary. As shown in a Form NAR1, on 27 March 2019, LYX acquired the P’s sole issued share from GRL19, thereby becoming P’s sole shareholder and sole director.

2.12As noted above, on 15 May 2020:

(1) As shown in a Form NSC1, P allotted one share to WSH. Thus, LYX and WSH each held one share in P;

(2) As shown in a Form ND2A, WSH was also appointed as the second director.

2.13On 7 December 2020:

(1) As shown in a Form NSC1, LYX was allotted an additional 1,000 shares. This resulted in LYX holding 1,001 shares, and WSH holding one share;

(2) On the same day, WSH was recorded in a Form ND2A as having resigned as director.

2.14On 16 February 2021, as shown in a Form ND2A presented by Soloman, CLY was appointed a second director.

2.15On 24 February 2021, WSH transferred his one share to LYX. LYX therefore became the sole shareholder of P, holding all 1,002 shares.

2.16On 9 July 2021:

(1) LYX transferred 501 of his 1,002 shares to CSY. The consideration was stated to be HK$501 (HK$1 per share). LYX and CSY thus became equal shareholders of P, each holding 501 shares;

(2) As shown in a Form ND2A, CSY was appointed as an additional director of P.

2.17As shown in a Form ND2A, on 7 October 2021, CSY and CLY resigned as P's directors.

(iii) Overview of the disputes

2.18The shape of the disputes between the parties (as pursued in closing) may be summarized as follows.

2.19On behalf of the Relevant Ds, Mr Chen submits:

(1) WSH never validly resigned as, and remains to date, a director of P;

(2) CLY was never validly appointed as director since (a) there is no written board or shareholders' resolution to such effect, (b) neither LYX nor WSH decided to appoint CLY as a director, (c) consequently, there is no room for the application of the Duomatic principle and the irregularity principle;

(3) CSY was never validly appointed as director since (a) there is no written board or shareholders' resolution to such effect, (b) neither LYX nor WSH decided to appoint CSY as a director, (c) consequently, there is no room for the application of the Duomatic principle and the irregularity principle;

(4) Alternatively, even if CLY and CSY were validly appointed as directors of P, they resigned as directors by a Whatsapp message sent by CLY to ZH on 6 October 2021 (“6/10/21 Whatsapp Message”);

(5) It follows from the above that the Resolution was invalidly passed and is null and void.

2.20On behalf of P, Ms Lan contends as follows:

(1) LYX had procured and P accepted the resignation of WSH with effect on 7 December 2020 and thus the relevant Form ND2A was filed with the CR on 8 December 2020 by Soloman;

(2) As the sole director, LYX, or through ZH acting for and on his behalf, had procured P to appoint CLY as director with effect on 16 February 2021 and thus the relevant Form ND2A was filed with the CR on 3 March 2021 by Soloman;

(3) CLY has since her appointment acted in the capacity of P’s director with the consent and approval of LYX and/or P;

(4) With the consent of CLY, LYX, or through ZH acting for and on his behalf, had procured P to appoint CSY as director with effect on 9 July 2021 and thus the relevant Form ND2A was filed with the CR on 23 July 2021 by Soloman;

(5) CLY and CSY have never been removed as directors by LYX or P;

(6) CLY and CSY did not tender their resignations as directors by way of the 6/10/21 Whatsapp Message sent by CLY to ZH;

(7) The Resolution signed by CLY and CSY in their capacity as directors to commence the present proceedings is therefore valid.

3.Approach in the evaluation of the evidence

3.1In approaching the evidence in the present case, I have borne in mind the following matters.

3.2First, there is no dispute between counsel that the legal burden of proving proper authority to sue lies squarely upon P even though the Authority Issue is raised by the Relevant Ds: Tang Kun Nin Tony v Cheng Wai Fong, HCA 87 of 2011, 12 March 2014 §§61-64. Ms Lan, in view of the particular evidential features in the present case, understandably emphasizes that, whilst the legal burden rests on P, the Relevant Ds bear the evidential burden, and unless they discharge the evidential burden, there will be nothing to contradict the prima facie effect of the evidence adduced by P: Tang Kun Nin Tony §63.

3.3Secondly, I have been reminded by Mr Chen that in the trial of the Authority Issue, I should only make the necessary findings to resolve that issue and should go no further: Sun Tian Gang v Changchun High & New Technology Industries Development Parent Company [2022] HKCFI 3348 §110.

3.4Thirdly, it is trite that the credibility of a witness should be assessed by reference to contemporaneous documentation where it exists, as well as inherent probabilities having regarding to all the facts that are known. It is also important to bear in mind the internal consistency of the evidence of a witness, which is often tested by a comparison between the oral testimony of the witness on the one hand and his witness statement and pleadings on the other: Hui Cheung Fai v Daiwa Development Ltd, HCA 1734/2009, 8 April 2014 §§77-82.

3.5In addition, Mr Chen also relies on Leung Chin Sing Rabo v Ko Chun Hay Kelvin [2021] HKCFI 2242 §42 for the general proposition that it is rare in modern commercial litigation to encounter a claim based on an agreement which is not only said to have been purely by word of mouth but of which there is no contemporaneous documentary record of any kind. The prevalence of e-mails, text messages and other forms of electronic communication is such that most agreements or discussions which are of legal significance, even if not embodied in writing, leave some form of electronic imprint. The foregoing submission is made in particular to criticize the lack of cogency of an agreement reached between CSY and ZH’s husband, Mr Jiang Wei (“Jiang”) by which it was orally agreed between Jiang (on P’s case the true owner of P) and CSY that (1) they would be equal partners and thus each entitled to 50% shareholding in P and (2) CSY would be appointed as a director of P once the Restructuring (as defined below) was completed (“Alleged Agreement”). As canvassed below, the Alleged Agreement is the cornerstone of P’s case as to why, and how, CLY and CSY came to be appointed as directors of P.

3.6In closing, the case advanced by Mr Chen represented yet another departure, in that the case advanced is not even consistent with the evidence filed by the Relevant Ds even after the engagement of Jones Day, which evidence was already inconsistent with that filed whilst the Relevant Ds were represented by Chungs. As observed by Ms Lan, at least 3 different versions have been advanced by the Relevant Ds. As no pleadings have been filed in respect of the Authority Issue, Mr Chen says that the following proposition at Best Star Holdings Limited v Lam Chun Hing, HCA 409 of 2008, 22 February 2012 §133 is a fortiori:

“I recognise that my views above on the true nature of the deal have not been pleaded in the parties’ pleadings. As pointed out above, these views do not directly impact upon my decision on the claim or specific performance, which is based on the reasons that I have explained above. The views that I take of the true nature of the deal between the plaintiff and the 3^rd defendant is based on the evidence before me, and has been repeatedly pointed out, the question as to what had been agreed is a question of mixed fact and law, and may not be precisely those advanced by the parties. I do not think that in the circumstances of this case I am constrained by the pleadings (which I consider to be unsatisfactory and confusing) to make findings (on what was the true nature of the deal) that do not, in my judgment, reflect reality. In this connection I bear in mind that the ultimate principle is that the trial must be fair. I do not consider that the views that I take on the true nature of the deal would result in any unfairness to either the plaintiff or the 3^rd defendant…” (emphasis added)

4.Factual findings

4.1In the sections following, I will make findings which in my view are germane to the resolution of the Authority Issue by reference to a number of broad topics organized (largely) chronologically. Although the analysis is done chronologically, I have considered the evidence overall as a whole in reaching my findings.

4.2Before doing so, I should make a number of general observations on the credibility of the witnesses.

4.3As envisaged by DHCJ Le Pichon’s order of 3 March 2023, Mr Chen called LYX, ZH, WSH and LKL. For the reasons set out below, with the exception of LKL, I do not find LYX, ZH and WSH to be credible witnesses. As noted above, the evidence of the Relevant Ds has evolved over time, and by closing, 3 different versions have been advanced. In summary:

(1) In respect of the resignation of WSH: The position taken in LYX 2^nd (adopted in ZH 1^st) was that WSH, consistent with the relevant Form ND2A resigned on 7 December 2020 (LYX 2^nd §20). In ZH 2^nd, the position taken was that WSH only resigned on 24 February 2021 when he transferred his one share to LYX (ZH 2^nd §§6-8). LYX 4^th §3 took the position that WSH had not resigned as at 16 February 2021 when CLY was appointed as director. In his oral evidence, LYX confirmed that his position was that WSH resigned on 24 February 2021. In closing, Mr Chen took the position that WSH never resigned and remains a director until now;

(2) In respect of the appointment of CLY and CSY: The position taken at LYX 2^nd §§25 and 36 (adopted in ZH 1^st) was that he, as sole beneficial shareholder and the sole director of P, procured P to appoint CLY as director on 16 February 2021 (consistent with the relevant Form ND2A) as he was induced by misrepresentations allegedly made by CSY to ZH (as his agent). The positions taken in LYX 3^rd §§10-11 and ZH 2^nd §§9-10 were that LYX was hesitant to appoint CLY and CSY but LYX had asked ZH to prepare the necessary documentation which ZH mistook to mean that LYX had decided to appoint CLY and CSY as directors. At trial, LYX said that he was never hesitant since he would not have agreed to the appointments of CLY and CSY. ZH went even further to say that there was never any discussion with LYX on the appointments of CLY and CSY and she, on a frolic of her own, instructed Soloman to prepare the necessary documentation and make the company filings.

4.4LYX explained that LYX 2^nd was drafted in English and the content was not interpreted to him and ZH explained that she was mistaken in ZH 1^st in which she adopted the content of LYX 2^nd. I do not regard the explanations proffered to be satisfactory. This is particularly so when the content of LYX 2^nd was based on instructions given by ZH. It bears emphasis that LYX 2^nd was filed in April 2022 and on ZH’s own evidence, she gave instructions to Chungs in February or March 2022 but she knew of the “mistakes” when the relevant Form ND2A was filed for the resignations of CSY and CLY on 5 November 2021.

4.5Conversely, I find the evidence of CLY and CSY to be generally reliable. As pointed out by Ms Lan, their evidence is generally consistent with the contemporaneous documentary evidence. As regards Mr Chen’s criticism directed at the Alleged Agreement, for the reasons set out below, I accept Ms Lan’s submission that many of the undisputed/indisputable matters, more likely than not, only transpired because of the existence of the Alleged Agreement.

4.6I should also point out that Mr Tai Kwok Leung Alexander (“Tai”) and Mr Cao Zhong (“Cao”) each filed an affirmation for P on 27 May 2022. As noted above, DHCJ Le Pichon’s order of 3 March 2023 did not require P to tender Tai and Cao for cross examination. In any event, I do not find it necessary to resort to the evidence of Tai and Cao in my fact-finding exercise.

5.The underlying commercial transactions

5.1At the material time, D1 was a company listed on the Hong Kong Stock Exchange (Stock Code 269). On 9 February 2010, D1 issued a promissory note with principal value of HK$280 million (“China Alliance PN”) to a company called China Alliance International Holding Group Limited (“China Alliance”).

5.2As stated in D1’s annual report for the year ended 31 March 2020, D1 had since 2011 defaulted on its repayment obligations under the China Alliance PN. On 16 April 2019, the China Alliance PN, together with the accrued and default interests, was extinguished and placed by new promissory notes of HK$683,348,000 bearing coupon interest at 5% per annum payable on 15 April 2024 (“New PNs”). As noted above, LYX acquired P in March 2019. Of the New PNs, HK$400,000,000 in value was issued by D1 to P at the direction of China Alliance (“Mighty China PNs”).

5.3On the materials before me, it is indisputable that D1 was mired in financial difficulties. On LYX’s own evidence, it became apparent to him that D1’s financial position became increasingly precarious, and by June 2020, the prospects of recovering the principal amount under the Mighty China PNs was remote (LYX 2^nd §17).

5.4On 22 June 2020, LYX procured P to enter into a loan agreement as borrower with one Mr Wu Xiongbin (“WXB”) in the principal sum of RMB12,000,000 (“WXB Loan Agreement”). Under the WXB Loan Agreement, HK$100,000,000 in value of the Mighty China PNs was pledged as security. It is P’s case that the WXB Loan Agreement was part of the scheme to wrongfully misappropriate the Might China PNs. WXB is the uncle of WSH.

6.The Alleged Agreement

6.1It is the Relevant Ds’ evidence that ZH had a close relationship with LYX’s wife, and since LYX did not reside in Hong Kong, at the request of LYX’s wife, ZH agreed to assist LYX, including any liaison with Soloman, on a complimentary basis. LYX regarded ZH as his personal assistant.

6.2As mentioned above, ZH is Jiang’s wife. By the time of trial, there was no longer any dispute that, on 5 November 2020, CSY met Jiang and ZH at a dinner party. As shown in the evidence, on 5 November 2020 at 7:12 pm, Jiang and CSY exchanged WeChat contact.

6.3The evidence on the Alleged Agreement set out at CSY 1^st §§24-50 may be summarized as follows:

(1) Jiang told CSY that his company (ie P) held the Mighty China PNs and he wanted to build up his shareholding in D1 with a view to taking control of D1’s board eventually;

(2) In mid-November 2020, Jiang introduced Mr Fung Tsun Pong (“Fung”), the vice-chairman of D1 to CSY;

(3) At the material time, VMS Investment Group Limited and its associates (“VMS Group”), was a substantial shareholder of D1 and Cao, the chairman of D1, had the support of the VMS Group;

(4) Fung was not on good terms with Cao and it was necessary to have someone to lobby VMS Group in respect of any debt restructuring proposal;

(5) CSY suggested to Jiang the possibility of negotiating with D1 to capitalize the Mighty China PNs (“Restructuring”), and to exert pressure on D1 and its shareholders, P should commence winding-up proceedings against D1 in the Cayman Islands where D1 was incorporated;

(6) CSY knew Tai, a director of the VMS Group, and he could lobby Tai to support the Restructuring;

(7) CSY proposed to Jiang that he would be responsible for the winding-up proceedings in the Cayman Islands (including engaging lawyers and settling the legal fees) and lobbying the VMS Group. CSY asked for 50% interest in P and to be appointed as a director of P once the Restructuring was accomplished;

(8) Jiang accepted CSY’s proposal.

6.4Conversely, it is Relevant Ds’ evidence that:

(1) LYX had never met CLY and CSY. It is said that he was told by ZH that CSY was introduced to her as a powerful and well-connected tycoon in Hong Kong and that CSY claimed that he could assist LYX to recover his investment in D1;

(2) LYX authorized ZH to continue to liaise with CSY regarding a potential cooperation with CSY;

(3) The Relevant Ds denied the existence of the Alleged Agreement. Instead, they say that a number of representations were made by CSY to ZH (as LYX’s agent) as to CSY’s ability and connection to assist LYX in recovering LYX’s investments in D1 through various means including litigation;

(4) The appointments of CLY and CSY as directors of P and the transfer of 501 shares in P to CSY were all as a result of LYX having been induced by CSY’s (mis)representations.

6.5In closing, Mr Chen characterized the Alleged Agreement as a fabrication, on the predominant, if not sole, basis that the Alleged Agreement was not documented in writing and did not even have any “electronic imprint”, not even in the WeChat messages exchanged between Jiang and CSY.

6.6I do not accept Mr Chen’s submissions. The critical difference between P’s case and the Relevant Ds’ case is the involvement of Jiang. Whereas it is P’s case that the Alleged Agreement was reached with Jiang, it is the Relevant Ds’ (in particular ZH’s oral evidence) that Jiang was simply assisting her in working with CSY. Yet, as observed by Ms Lan, the Relevant Ds have adduced practically no evidence on LXY’s involvement in the Restructuring which in fact took place. Indeed the contemporaneous documentary evidence shows that:

(1) Starting from early December 2020, there were frequent WeChat messages between Jiang and CSY to discuss the underlying commercial transaction, including the provision by Jiang to CSY a number of underlying documents. In particular, on 4 December 2020 at 10:23 am, Jiang sent a message stating that he owned the Mighty China PNs (是，華成即我，4億 [the value of the Mighty China PNs]). LYX’s evidence is that as he was not privy to the WeChat communication, he was unable to offer an explanation for Jiang’s statement;

(2) In WeChat messages exchanged on 7 December 2020, upon CSY’s query (at 2:20 pm) that P had 2 directors (at that time LYX and WSH), Jiang was able to provide to CSY a copy of the relevant Form ND2A showing WSH’s resignation which was in fact filed at the CR the following day. CSY’s query was made in respect of a resolution to be signed by P’s director to engage Messrs Conyers Dill & Pearman (“Conyers”) for proposed winding-up proceedings in the Cayman Islands against D1. At 4:40 pm, Zhang asked CSY whether LYX could sign the written resolution which was a draft of a written resolution of sole director (“8/12/20 Resolution”);

(3) On the following day at 10:51 am, Jiang sent to CSY by WeChat the 8/12/20 Resolution signed by LYX and informed him that the original was being couriered. LYX admitted that he signed the 8/12/20 Resolution. There is no evidence to suggest that LYX or ZH was ever consulted on the appointment of Conyers. Indeed, ZH in her oral evidence admitted that she did not have any clear idea that the discussion between Jiang and CSY was to commence winding-up proceedings against D1 in the Cayman Islands. As it is LYX’s evidence that he had authorized ZH to liaise with CSY, it must therefore follow that LYX himself was not consulted on the strategy either.

6.7As will be addressed in the later sections, the chronology shows that the Alleged Agreement was in fact implemented. For the above and reasons following, I find that, on the balance of probabilities, the Alleged Agreement was reached between CSY and Jiang.

7.Resignation of WSH

7.1I have already summarized at §4.3(1) above how the Relevant Ds’ evidence on the resignation of WSH had evolved over time.

7.2The Relevant Ds’ original position (as set out at LXY 2^nd and ZH 1^st) was that WSH did resign on 7 December 2020. After Jones Day became involved, the subsequent evidence (ZH 2^nd, LKL 1^st, WSH 1^st, and LYX 3^rd) retracted from the initial position. Instead:

(1) WSH said that in early December 2020, he mentioned to LYX that he was considering resigning as P’s director to focus on his own work but he did not take any concrete action and did not give any written notice of resignation. It was only on 24 February 2021 when he returned the one share that he considered that he had resigned as P’s director;

(2) LKL’s evidence is that, in or around early December 2020, at ZH’s request, Soloman prepared the relevant documentation for WSH’s resignation including a draft letter of resignation to be signed by WSH. Until the involvement of Jones Day, she always thought that WSH did sign the draft letter of resignation and upon Jones Day’s query and further checking, she came to realize that WSH did not sign the relevant written notice of resignation;

(3) In ZH 2^nd, ZH said that in early December 2020, she happened to have a causal discussion with LYX and came to realize that WSH might well wish to resign as P’s director. By reason of her miscommunications with LYX and misapprehension that WSH’s resignation was to take place then, she caused Soloman to prepare the relevant documentation and mistakenly asked Soloman to lodge the relevant Form ND2A on 8 December 2020. Upon queries from Jones Day, she came to realize that WSH did not resign until about 24 February 2021;

(4) In LYX 4^th, LYX pointed out that WSH remained a director as at 26 February 2021 and WSH never gave written notice of resignation and P never removed WSH.

7.3In my view, it is plain from LKL’s evidence that, at the material time, LYX and/or ZH did not follow letter of P’s articles strictly. For example, in relation to WSH’s appointment as director in May 2020, it was LKL’s evidence that the relevant resolution prepared by Soloman was not signed by LYX. For WSH’s resignation, Soloman prepared a resolution for the purpose of accepting P’s resignation (which Mr Chen says that is not required as a matter of law) but it was not signed by LYX. Pertinently, Soloman filed the relevant Form ND2A on 8 December 2020 because she received instructions from ZH to do so on or about 7 December 2020, coinciding with the discussions between Jiang and CSY set out at §6.6(2) and (3) above. By way of a further example, there is also no evidence of any resolution for the issuance of shares whereby, on 7 December 2020 (the day on which WSH was recorded as having resigned) LYX became the overwhelming shareholder of P.

7.4The Relevant Ds’ oral evidence at trial was that usually LYX would inform ZH of the result which he wanted to achieve, and he left ZH to liaise with Soloman to prepare the necessary documentation to achieve that result. This is no doubt precipitated by LYX’s own view, as set out at LYX 1^st §7(3) (which was drafted in Chinese) that at all material times, he was P’s sole beneficial shareholder (which WSH agreed) and had the final say in the appointment and removal of directors (在所有相關時刻，本人一直是原告人所有股份的唯一實益擁有人，擁有任名或罷免董事的最終權力).

7.5I agree with Ms Lan that the retraction by the Relevant Ds from their initial position (namely that WSH did resign on 7 December 2020) is an afterthought, opportunistically premised on Jones Day’s discovery that WSH did not sign the letter of resignation prepared by Soloman.

7.6Indeed, the position taken in the Relevant Ds’ later affirmations and WSH 1^st, namely that WSH resigned on 24 February 2021 when he transferred the 1 share held by him back to LYX, is equally untenable on the Relevant Ds’ own logic. This is because WSH did not give written notice of resignation for his resignation to take effect on 24 February 2021 either.

7.7The foregoing has enabled Mr Chen to astutely, but with respect opportunistically, take the position that WSH in fact still remains as a director even now. The position taken by Mr Chen has the effect of bolstering the Relevant Ds’ case, in that even were CLY and CSY were validly appointed, the Resolution was ineffective as there were at that time 4 directors, namely, LYX, WSH, CLY and CSY, and as such, CLY and CSY did not constitute a majority.

7.8For the reasons, set out in the analysis section below, I do not accept Mr Chen’s argument. For present purposes, I make the following factual findings.

7.9As submitted by Mr Chen, by reference to his reliance on Best Star, it is open to me, subject to the issue of fairness, to make findings on the true nature of the events based on the evidence before me, even if my conclusion are not those precisely advocated by the parties. In my view, the true position is that, LYX had decided that WSH was no longer to hold office from 7 December 2020 (in all likelihood by reason of the Alleged Agreement). That was the decision communicated to ZH and she left the documentation to ZH to liaise with Soloman and somehow the decision was taken to use the resignation route. Therefore, notwithstanding that there was no written notice of resignation and the fact that the resolution to accept WSH’s resignation was not signed, ZH instructed Soloman to present the relevant Form ND2A on 8 December 2020. The reason why it was decided that WSH should no longer hold office was because, pursuant to the Alleged Agreement, steps were going to be taken to pursue the Restructuring which would turn P from a company simply holding the Mighty China PNs to one with real activities, and that was why, on 8 December 2020, LYX signed the 8/12/20 Resolution as P’s sole director. I doubt very much that there was in fact any discussion in early December 2020 between LYX and WSH on the latter’s intention to resign, which ZH then misunderstood to be WSH’s actual decision to resign.

8.Appointment of CLY as P’s director

8.1CLY was recorded as having been appointed as a director on 16 February 2021.

8.2The Relevant Ds accepted initially that CLY was appointed as P’s director in LYX 2^nd and ZH 1^st. They later retracted from the position following the engagement of Jones Day as it was discovered that LYX had not signed the relevant resolution prepared by Soloman . I have summarized at §4.3(2) above how the evidence evolved over time above. At the trial, LYX said that he only discovered that CLY was appointed when it became necessary to file the relevant Form ND2A to record her resignation in October / November 2021.

8.3Conversely, it is CLY and CSY’s evidence that since LYX was not in Hong Kong, an agreement was reached between Jiang and CSY in February 2021 that CLY should be appointed as a director since from 8 December 2020 onwards, CLY, on CSY instructions, had worked with Conyers in preparing for the Cayman Islands Proceedings.

8.4I do not accept the Relevant Ds’ evidence. The documentary evidence clearly shows that CLY acted as P’s director and I do not accept LYX’s evidence that, through inadvertence, he did not pay attention to the details of the contemporaneous documents, or that he thought CLY was simply acting as an agent for the purpose of assisting in the Cayman Islands proceedings and for the purpose of opening a bank account at Bank of Communications (Hong Kong ) Limited (“BOCOM”).

8.5The more significant examples are as follows:

(1) The Cayman Islands proceedings were commenced in March 2021. The supporting affirmation dated 16 March 2021 was affirmed by CLY expressly in her capacity of P. On 18 March 2021, LYX also made an affirmation for the Cayman Islands proceedings (in Chinese) expressly confirming the content of CLY’s affirmation;

(2) P eventually reached a settlement with D1 on 1 June 2021 (“Settlement Agreement”), and under Clause 12.2 thereof, notice to be given pursuant to the Settlement Agreement was to be sent to CLY’s email as director of P;

(3) In the board resolution dated 18 June 2021 for the opening of the BOCOM account (in Chinese) which LYX signed, CLY co-signed as director of P.

8.6Again, there is no evidence from the Relevant Ds that LYX was involved in any material way in the Cayman Islands proceedings. Conversely, it is CSY’s evidence that Conyers’ branch office was in Hong Kong and P also engaged MTC Consulting Ltd (“MTC”) to assist in liaising with Conyers’ representatives in Hong Kong. It is CSY’s evidence that he paid for the legal costs. As LYX’s name was used in preparing certain documents for the Cayman Islands proceedings, LYX was asked to sign certain documents for P but they were all drafted or prepared by CLY and/or Conyers upon CLY’s instructions. I accept CSY’s evidence.

8.7The Settlement Agreement in fact achieved the objectives for the Restructuring under which HK$296 million of the Mighty China PNs would be capitalized into 1.48 billion shares in D1 and the remaining sun of HK$ 104 million (“Remaining Indebtedness”) would be covered by existing and new promissory notes issued by D1. D1 made an announcement of the Settlement Agreement on 1 June 2021.

8.8Again, there is no evidence from the Relevant Ds that LYX was involved in any material way in the Settlement Agreement. Conversely, it is CSY’s evidence, which I accept, that from April 2021 he, Jiang and Fung negotiated in earnest on the settlement and CSY also lobbied Tai for the VMS Group’s support which eventually led to the Settlement Agreement. CSY and CLY were able to adduce evidence that Fung had sent the draft settlement deed to CSY on 26 May 2021, prior to its execution. I accept CSY’s evidence.

8.9In my view, the true position is that it was LYX’s intention (in all likelihood pursuant to the Alleged Agreement) to appoint CLY on 16 February 2021. In the analysis section below, I will deal with the relevance of the fact that WSH was at that time still a shareholder (albeit holding an extremely minor shareholding) on the appointment of LYX.

9.Appointment of CSY as director

9.1Similar to CLY’s appointment, the Relevant Ds have retracted from their initial acceptance that CSY was appointed as P’s director.

9.2The Relevant Ds’ evidence is in summary as follows:

(1) On 9 July 2021, LYX transferred 501 shares in P to CSY to hold on trust for LYX at CSY’s request to enable him to conduct negotiation with the VMS Group as a result of CSY’s representation to ZH in May to July 2021 that CSY had a close relationship with the VMS Group and by becoming a nominal shareholder he would be able to engage in constructive discussions with the management of the VMS Group to realize some value out of P’s shares in D1;

(2) Also on 9 July 2021, LYX instructed ZH to prepare the necessary documentation to appoint CSY as director but he was hesitant to do so and that was why he eventually did not sign the relevant resolution;

(3) LYX explained that there was a difference between CSY becoming a shareholder on the one hand and a director on the other. His hesitation stemmed from the fact that he did not want CSY to have any power in the management of P;

(4) It is LYX’s evidence that ZH had misunderstood him and ZH mistakenly instructed Soloman to file the relevant Form ND2A;

(5) Inconsistently, it was ZH’s oral evidence that she did not even discuss CSY’s appointment as director with LYX as the request to be appointed as director was made directly from CSY to ZH.

9.3Conversely, it is CSY’s evidence that:

(1) Following the Settlement Agreement, the Restructuring was largely accomplished. Upon discussion and in furtherance of the Alleged Agreement, Jiang and CSY agreed that (a) CSY would be appointed as director of P and 50% shareholding in P would be transferred to him, (b) the registered office of P should be changed from Soloman’s office to CSY’s office, and (c) CSY’s agent would be appointed as director in D1’s board;

(2) Even back in February 2021, CSY did not want to have any outside shareholder and that was why WSH transferred his one share back to LYX;

(3) As a matter of fact (a) on 15 June 2021, CSY’s agent (one Mr Li Wing Chiu), was appointed as an executive director of D1 and (b) on 22 June 2021 the Company’s registered address was changed to CSY’s office;

(4) On 9 July 2021, CSY became 50% shareholder in P and was recorded as having been appointed as a director.

9.4I prefer CSY’s evidence. Quite apart from the fact that there are internal inconsistencies between LYX and ZH even on their latest evidence at trial (not to mention their later evidence is inconsistent with their initial position), the Relevant Ds’ evidence is unsatisfactory and inherently improbable in the following respects:

(1) According to the Relevant Ds, CSY would receive nothing in return for his services;

(2) Yet, it is indisputable that the invoices for the legal fees in respect of the Cayman Islands proceedings were sent to CSY and there is evidence in the form of bank records that payments were made by CSY;

(3) The Relevant Ds’ evidence also does not account for the indisputable facts that the registered office of P was changed to CSY’s office or that Mr Li Wing Chiu was appointed as an executive director of D1;

(4) The cogency of LYX’s alleged trust arrangement is also suspect. Bearing in mind that LYX never met CSY, it is commercially unlikely that no document was created to evidence the trust arrangement when 50% shareholding in P was transferred to LYX.

9.5In my view, the true position is that the transfer of the shares in P to CSY and the appointment of CSY as director on 9 July 2021 were pursuant to the Alleged Agreement and, as such, the intention of LYX was to appoint CSY as director of P.

10.Analysis

10.1In this section, I will analyze the validity of WSH’s “resignation” and the appointments of CLY and CSY as directors in the light of the above factual findings. Although Ms Lan relies on both the Duomatic principle and the irregularity principle, it seems to me that the matters can be resolved by primarily resorting to the former.

10.2The Duomatic principle allows a requirement under the articles (which requires a course to be approved by a group) to be avoided if all members of the group, being aware of the relevant facts, either give their approval to that course, or so conduct themselves as to make it inequitable for them to deny that they had been given their approval. Whether the approval is given in advance or after the event, whether it is characterized as agreement, ratification, waiver or estoppel, and whether members of the group give their consent in different ways at different times, does not matter. This principle extends to decisions of directors: WHC Ltd v Hong Kong Wine Chamber of Commerce Ltd [2019] HKCFI 2548 at §§47-48 and EIC Services Ltd v Phipps [2003] EWHC 1507 (Ch) §122.

10.3As explained in Highfit Development Co Ltd (in liquidation) v Koo Siu Ying & Ors [2025] HKCFI 2775 §181:

“The Duomatic principle applies to cure irregularities in the calling or conduct of the meeting, to replace the need to have a meeting at all, and further cures procedural irregularities stemming from shareholders’ agreement as well as any defect in the statutory written resolution procedure (para 7.440, [Palmer’s] Company Law, citing Euro Brokers Holdings Ltd v Monecor (London) Ltd [2003] EWCA Civ 105). The fact that no actual meeting was held in this case, or that there was allegedly no proper notice of the EGM to Lim are not material, if the EGM Resolution and minutes reflect the informed consent of the shareholders.”

10.4As explained in Hollington on Shareholders’ Rights, 10^th Ed §§5-13 to 5-16:

“For the “Duomatic” principle to apply, there must be sufficient material from which an observer could discern that the shareholders had applied their minds to the decision in question…

Such approval or acquiescence, however, cannot be effective if it is a fraud on its credit or an ultra vires transaction such as an unlawful return of capital two its members or a breach by the directors of their “creditor duty” when it is engaged…

In general, the brother knowledge and consent for this purpose is that of the registered shareholder, regardless of any person’s beneficially interested in the shares, on the principle that the company cannot look behind the register or enquired as to trust affecting share shares…

Where, however, the ultimate beneficial owner, and not the registered shareholder, is taking all the decisions in the relevant transactions, the Duomatic principle applies as regards the consent of (and authority given by)) the ultimate beneficial owner: Ciban Management Corp v Citco (BVI) Ltd [2020] UKPC 21; [2021 AC 122 at [47]”…” (emphasis added)

10.5The requirement of “informed consent” is one emphasized by Mr Chen by reference to EIC §§139-140.

10.6In my view, the reference to Ciban is especially pertinent in the present case. At Ciban §47, Lord Burrows observed as follows:

“A further possible qualification of the Duomatic principle is that, in some cases, doubts have been expressed as to whether the principle applies where it is the beneficial owners, rather than the registered shareholders, who consent. See, eg, Palmer’s Company Law, 25th ed (2020), para 7.439. But the correct view is that, at least as here where the ultimate beneficial owner and not the registered shareholder is taking all the decisions in the relevant transactions, the Duomatic principle applies as regards the consent of (and authority given by) the ultimate beneficial owner. This is supported, as a matter of principle, by Mann J’s judgment in Shahar v Tsitsekkos [2004] EWHC 2659 (Ch), para 67; and by Newey LJ’s judgment in Dickinson v NAL Realisations (Staffordshire) Ltd [2019] EWCA Civ 2146; [2020] 1 WLR 1122, para 20, in which, while not deciding the point, he stated that he was willing to assume (in the same way as he had done as Newey J in In re Tulsesense Ltd; Rolfe v Rolfe [2010] EWHC 244 (Ch); [2010] 2 BCLC 525, para 42) that “the assent of the beneficial owners of a share can meet Duomatic requirements.”…”

10.7Ciban has been applied in the recent case of The Joint Liquidators of Super Perfect Limited (In Liquidation) v Leung Yuk Lan & Ors [2025] HKCFI 602. DHCJ Yuen observed as follows:

“[31.1] First, it has been held by the Privy Council [ie the Ciban case] that a beneficial owner can ratify directors’ acts as a registered shareholder can, at least where it is the beneficial owner, rather than the registered shareholder, who is taking all the decisions in the relevant transactions.”

10.8As pointed out at §7.4 above, it is LYX’s own evidence that at all material times he was the sole beneficial owner of P and had final say on the removal and appointment of directors. It has not been suggested that WSH took part in any decision-making in matters concerning the removal and appointment of directors. In my view, the present case is one where it is apt to apply the principles set out in Ciban.

10.9Given the above factual findings, it seems to me that WSH has since 7 December 2020 vacated his office as director of P. I have found that it was LYX’s intention that WSH should no longer hold office and it did not matter to him the mechanism by which that result was to be achieved. I doubt very much that he was aware of the terms of P’s Articles anyway as they were in English and it was only a trial that LYX claimed that P’s Articles were explained to him. Under Model Article 25, it was plainly open to LYX to remove WSH by an ordinary resolution. Despite the lack of written notice of resignation, LYX had clearly given his approval to WSH vacating office (in all likelihood as a result of the Alleged Agreement) by signing the 8/12/20 Resolution as the sole director of P, as contemporaneously discussed between Jiang and CSY. In my view, I find that the true position is that WSH had been “removed” as a director on 7 December 2020. In Ms Lan’s closing submission, the position taken is that LYX had all along treated WSH to have resigned on 7 December 2020 and the Duomatic principle applies to “validate WSH’s resignation”. In my view, Ms Lan’s submission has unnecessarily placed too much emphasis on the fact that box ticked in relevant Form ND2A was the resignation route. As stated above, company filings only evidence the view of the person(s) who prepared them (in this regard plainly not the intention of LYX). In my view, the true position is that LYX simply intended (and was in a position as the sole beneficial owner to decide and did decide) for WSH to vacate office and that was what transpired.

10.10As regards the appointment of CLY, LYX and WSH were shareholders as at 16 February 2021. I have found that LYX’s intention was to appoint CLY. The point taken by Mr Chen is that WSH never assented to CLY’s appointment. However, for the reasons set out above, in the present case it was LYX who was taking all the decisions in the relevant transaction. I find that CLY was validly appointed notwithstanding that there was no resolution for the appointment of CLY. In any event, at the board level, LYX was the sole director at the material time. The Duomatic principle therefore applies at both the shareholder and board levels. LYX’s approval of CLY’s appointment was clearly shown by the facts found above, namely CLY was clearly permitted to throughout act as a director of P.

10.11For the same analysis, except that LYX was the sole shareholder and the board consisted of LYX and CLY at the time of CSY’s appointment, I find that CSY’s appointment as director was valid notwithstanding that there was no resolution.

11.Whether CLY and CSY resigned

11.1The 6/10/21 Whatsapp Message which the Relevant Ds rely on as CLY and CSY’s written notice of resignation is in the following terms:

“Hi 姜太你好：

…

另 MightyChina銀行戶口每月都需要保持一定存款額來維護，如公司在沒有運作需要，我和張生就先辭任董事職銜，及安排把銀行帳戶取消。如需保留帳戶我可以向銀行要求加入一位戶口授權人。現想徵求一下你們的意見，謝謝。” (emphasis added)

11.2As pointed out by Ms Lan, it has always been the Relevant Ds’ case that CLY and CSY were removed by LYX as the sole beneficial shareholder of P: LYX 1^st §7, LYX 2^nd §43 and LYX 3^rd §14. No resolution to remove CLY and CSY has been adduced by the Relevant Ds. As I have found that CSY was not holding the 501 shares on trust for LYX, the Relevant Ds are able to derive any assistance from the Duomatic principle (on the basis of lack of assent) or the irregularity principle (on the basis that the same result would have been inevitably obtained had the correct procedure been followed: Zhong Da Mining Holdings Ltd v Lam Wo Ping and Ors [2024] 3 HKLRD 365 §§35-44).

11.3On the issue of resignation, Mr Chen relies on Harry Greenhouse and Paysafe Financial Services Ltd [2018] EWHC 3296 for the following proposition:

“[18] There are two points of law that are relevant to the ‘unilateral notice issue’. The first is that the question whether a communication constitutes the giving of notice is a matter of interpretation of the communication and, as shown by, for example, Mannai Investments Co Ltd v Eagle Star Life Assurance Co Ltd [1997] AC 749, HL, an objective and contextual approach should be applied. In other words, the same, or at least a directly analogous, approach to interpretation of a notice should be taken as is applicable to interpreting a contract. The second point of law is that the general rule is that, once a unilateral notice has been given, it cannot be withdrawn except by mutual consent. As Diplock J said in Riordan v War Office [1959] 1 WLR 1046, 1054 (affirmed at [1961] 1 WLR 210, CA), in the context of an employee’s resignation notice: ‘It is a unilateral act, requiring no acceptance by the other party, and, like a notice to quit a tenancy, once given it cannot in my view be withdrawn save by mutual consent.’”

11.4In construing the 6/10/21 Whatsapp Message, the relevant context is that, according to CLY (1) as there were still fees due to Conyers, she was terrified of demands made by debt collecting agent, (2) the operation of the bank account was troublesome and (3) she did not find her work to serve any practical purpose. But that contextual analysis, in the iterative process of contractual interpretation, does not detract from the clear textual analysis that the 6/10/21 Whatsapp Message was simply one sent to ascertain ZH’s views as opposed to an unequivocal notice of resignation.

11.5In my judgment, CLY and CSY had not resigned and were not removed as directors.

12.The Resolution

12.1Given the foregoing, I have come to the view that the Resolution was valid. At time of the signing of the Resolution, P’s board consisted of LYX, CLY and CSY. CLY and CSY were the majority of P’s board.

12.2Lastly, Mr Chen argues that CLY and CSY improperly invoked Article 24(d) which provides as follows:

“A resolution in writing, signed by majority of the directors for the time being entitled to receive notice of a meeting of the directors, shall be as valid and effectual as if it had been passed at a meeting of the directors duly convened and held. without the need for any agenda or notice. The signature of any director may be given by his alternate. Any such resolution may be contained in one document or separate copies prepared and/or circulated for the purpose and signed by one or more of the directors. A cable, telex, fax or e-mail message or other written electronic communication sent by a director or his alternate shall be deemed to be a document signed by him for the purposes of this Article.”

12.3In China Shanshui Cement Group Ltd v Zhang Caikui, HCA 2880 of 2015, 15 January 2016, on the test for ascertaining whether or not a director has acted in breach of fiduciary duty, Au Yeung J observed as follows:

“It is unnecessary for the plaintiff to prove that a director was dishonest or that he knew he was pursuing a collateral purpose. The test is an objective one. The court must:

(a) Identify the power whose exercise is in question;

(b) Identify the proper purpose for which that power was delegated to the directors;

(c) Identify the substantial purpose for which the power was in fact exercised; and

(d) Decide whether that purpose was proper.”

12.4Mr Chen submits that applying the foregoing principles:

(1) The power whose exercise is in question is the power to pass a written resolution under Article 24(d);

(2) The proper purpose for which that power was delegated to the directors was to pass a resolution informally without calling a board meeting;

(3) The substantial purpose of CSY and CLY’s exercise of that power, however, was to avoid giving notice to LYX in order to prevent any objection from LYX or steps which LYX might take to obstruct their course of action;

(4) Such purpose is plainly improper. There is no dispute that CSY and CLY did not give notice to D3 before passing the Resolution. No explanations have been given. Their exclusion of LYX from the board's decision-making process, purely to serve their self-interest, did not in any way advance P's interest.

12.5I am unable to accept Mr Chen’s submissions. P’s claim is that the Remaining Indebtedness had been wrongfully and without the knowledge of CLY and CSY assigned to D2 including through an unauthorized settlement of the WXB Loan Agreement in June 2021 approved by WSH as shareholder when he was indisputably no longer a shareholder of P. According to D1’s announcement dated 1 December 2021, D2 was said to be P’s successor of the Remaining Indebtedness and the Remaining Indebtedness (and accrued interest) would be fully settled by the issuance of the Subject Shares to D2. Recorder Jin Pao SC was plainly satisfied that P’s claims against D1-D4 have crossed the merit threshold for an interim injunction to be granted.

12.6On 3 December 2021, P engaged solicitors (“PMT”) to write to D1 demanding D1 to stop the issuance of the Subject Shares to D2 as P had never assigned any rights to D2. As early as 7 December 2021, both D1 and D3 asserted LYX, as P’s sole director, did not authorize PMT to act on P’s behalf.

12.7In these circumstances, I am unable to see how it can be said that the exclusion of LYX in the passing of the Resolution was improper. Further, as pointed out by Ms Lan, the foregoing serious allegation was never put to either CLY or CSY at the trial.

13.Conclusion

13.1For the above reasons, I determine the Authority Issue in P’s favour.

13.2There is no reason why costs should not follow the event. I make a costs order nisi that costs of the Authority Issue be paid by the Relevant Ds to P, to be taxed if not agreed.

Ms Gekko LAN and Ms Lydia LEUNG, instructed by Messrs Patrick Mak & Tse, for the Plaintiff

Mr David CHEN and Ms Clara WONG, instructed by Messrs Jones Day, for the 3^rd - 4^th Defendants