庄跃进and Others v. 白平

DCCJ 324/2025

[2026] HKDC 673

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 324 OF 2025

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BETWEEN

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JUDGMENT

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1.By a summons dated 30 April 2025 (“Summons”), the 1^st to 6^th Plaintiffs (collectively “Plaintiffs” and individually “P1, P2, P3, P4, P5 and P6”) apply for default judgment for a declaration that the Defendant held different numbers of the shares in Kingstar (Hong Kong) Holdings Limited (皇星(香港)集團有限公司) (formerly known as Joystar (Hong Kong) Holdings Limited (怡星(香港)集團有限公司) (“Company”) on trust for the respective Plaintiffs (“Declaration”) and an order that the Defendant do execute all necessary documents for the transfers of the said shares to the respective Plaintiffs failing which the Registrar be appointed to execute same under section 38A of the District Court Ordinance (Cap 336) (“DCO”) (“Execution Order”).

I. Background

2.The Plaintiffs’ claims for the Declaration and the Execution Order as pleaded in the Statement of Claim are based on the following facts:-

(1) P1 invited the Defendant who agreed to assist him to manage the businesses to be carried out in the Mainland;

(2) A consensus was formed between P1 and the Defendant as follows:

(i) P1 would form a Hong Kong company to do businesses in the Mainland through its subsidiaries to be formed;

(ii) The Defendant would assist P1 to run the company and its businesses and would act as a nominee director of the company for P1; and

(iii) The Defendant would hold the shares of the company as bare trustee for and on behalf of P1;

(3) In 2004, the Company was formed; P1 and the Defendant became the two subscribers holding 9,900 and 100 shares respectively and the two directors of the Company;

(4) The costs for setting up the Company and the paid-up capital in the sum of HK$10,000 was paid by P1;

(5) In or around 2006, P1 commenced two new businesses in the Mainland each to be run under a new subsidiary company incorporated in the Mainland, namely 亿安(厦门)无纺布有限公司 and 裕兴通(厦门)汽车内饰材料有限公司 (“Subsidiaries”), shareholdings of which were held by the Company;

(6) In order for the Subsidiaries to be treated as wholly foreign owned enterprises in the Mainland (“WFOE”), the entire shareholding of the Company must be held by Hong Kong or foreign residents;

(7) Not being a Hong Kong or foreign resident, P1 intended to transfer all his shares in the Company to the Defendant, who was and still is a Hong Kong resident, in order to comply with the WFOE requirements;

(8) In or around June 2006, P1 invited 8 investors who agreed to invest in the businesses;

(9) On 6 June 2006, all investors, namely the Plaintiffs and the three others who are not parties to the proceedings (“Non-Parties”), the Company and the Subsidiaries entered into a written confirmation (“2006 Confirmation”) confirming, inter alia, that:

(a) the shareholdings in the Company and the Subsidiaries would be beneficially owned as follows:

(i) 65% by P1;

(ii) 24% by 黄紫终 (“Wong”);

(iii) 6% by P2;

(iv) 1% by 欧秀銮 (“Ou”);

(v) 1% by P3;

(vi) 1% by P4;

(vii) 1% by 林慕达 (“Lin”);

(viii) 0.5% by P5;

(ix) 0.5% by P6;

(“Respective Shareholdings”)

and

(b) the reason for the change in the registration of the shareholdings in the Company was to comply with the Mainland requirements;

(10) The Defendant also signed the 2006 Confirmation thereby confirming that he would hold the Respective Shareholdings in the Company for all investors as bare trustee;

(11) Pursuant to the 2006 Confirmation and on 15 June 2006, P1 transferred his 9,900 shares of the Company to the Defendant, who then became the holder of its entire shareholdings;

(12) On 4 February 2010, P1 resigned as director and the Defendant since then became the sole director and shareholder of the Company on the record;

(13) In or around 2022 and in breach of his fiduciary duty as trustee, the Defendant began to use his position as the sole director and shareholder of the Company to act against the interests of the Plaintiffs including the commencing of legal proceedings in the Mainland by the Company against the Plaintiffs’ will and interests;

(14) By reason of the Defendant’s breach, the Plaintiffs demanded the Defendant to return the Respective Shareholdings to them which the Defendant has failed and refused to do so; and

(15) P1 brought an action in the Mainland against the Defendant and obtained a declaration that the Defendant held 65% of the shares in the Company for him 10 December 2023; the Defendant’s appeal was dismissed on 15 March 2024 (“Mainland Proceedings”).

II. Procedural History

3.On 16 January 2025, the Plaintiffs issued the Writ indorsed with the Statement of Claim which was served to the Defendant by inserting the same into the letter box of an address in Yuk Yat Street, Tokwawan, Hong Kong (“Yuk Yat Street Address”) on 17 January 2025.

4.On 28 February 2025, the Writ was amended to include an additional address for the Defendant in Lok Shan Road, Tokwawan, Hong Kong (“Lok Shan Road Address”), which was the registered office of the Company. On the same day, the Amended Writ indorsed with the Statement of Claim was served on the Defendant by inserting the same into the letter boxes of the Yuk Yat Street Address and the Lok Shan Road Address. The Defendant had not responded nor had he filed any acknowledgment of service.

5.On 30 April 2025, the Plaintiffs took out the present application and the Summons was served to the Defendant by inserting into the letter boxes of the Yuk Yat Street Address and the Lok Shan Road Address.

6.The matter first came before Deputy District Judge Simon Ho on 10 July 2025. At the hearing, the learned Deputy Judge expressed his concern that the granting of the Declaration and the Execution Order sought by the Plaintiffs might affect the interests of the Non-Parties, namely Wong, Ou and Lin, who, according to the Statement of Claim, were the respective beneficial owners of 24%, 1% and 1% of the Company’s shareholdings as in 2006. In order to give them the opportunity to be heard if they so wished, the learned Deputy Judge adjourned the hearing and directed:

(1) the Plaintiffs to serve within 14 days on the Non-Parties and the Company (i) a sealed copy of the Amended Writ indorsed with the Statement of Claim, (ii) the Summons, (iii) the Plaintiffs’ Skeleton Submissions for the hearing, (iv) this order and (v) a cover letter explaining the current status of these proceedings and notifying them that they should take out application forthwith with the District Court if they intend to make any representation on the Plaintiffs’ present application and the order sought (“Non-Parties Documents”); and

(2) the adjourned hearing date shall not be fixed earlier than 30 August 2025 to allow the Plaintiffs sufficient time to comply with the procedural requirement as laid down under Order 15 rule 13A of the Rules of the District Court (Cap 336H) (“RDC”) in the event they decide to apply for notice of this action be served on the Non-Parties, and any such application shall be taken out within 14 days.

7.Order 15 rule 13A of the RDC provides:

“13A. Notice of action to non-parties (O. 15, r. 13A)

(1) At any stage in an action to which the rule applies, the Court may, on the application of any party or of its own motion, direct that notice of the action be served on any person who is not a party thereto but who will or may be affected by any judgment given therein.

…

(3) Every notice of an action under this rule shall be in Form No. 52 in Appendix A and the copy to be served shall be a sealed copy and accompanied by a copy of the originating summons or writ and of all other pleadings served in the action, and by a form of acknowledgment of service…

(4) A person may, within 14 days of service on him of a notice under this rule, acknowledge service of the writ or originating summons and shall thereupon become a party to the action, but in default of such acknowledgement and subject to paragraph (5) he shall be bound by any judgment given in the action as if he was a party thereto.

…”

8.The effect of the learned Deputy Judge’s order was to give the Plaintiffs the option to choose either to apply to serve the Notice of Action on the Non-Parties or to serve them with the Non-Parties Documents leaving them to decide whether to apply to take part in the proceedings. The Plaintiff chose the latter.

9.On 16 and 18 July 2025, the Plaintiffs served the Non-Parties Documents on Wong and the Company by inserting the same into the letter boxes of the Yuk Yat Street Address and the Lo Shan Road Address respectively.

10.As regards Lin and Ou whose usual and last known addresses are in the Mainland, the Plaintiffs’ solicitors applied for service through the judicial authorities of the Mainland pursuant to Order 11 rule 5A (2) of the RDC. On 15 December 2025, the Plaintiffs’ solicitors were informed that the Non-Parties Documents have been duly served to Lin and Ou on 30 September 2025 and 14 October 2025 respectively.

11.None of the Non-Parties nor the Company have responded or come forward to indicate any opposition to the Summons.

12.The matter came before me on 25 February 2026.

III. Service on the Defendant

13.All documents including those for the hearing of the application were served to the Defendant at the Yuk Yat Street Address and the Lok Shan Road Address. According to the 1^st, 2^nd, 3^rd and 5^th Affirmations of Lee Lai Sheung and the 1^st Affirmation of Ming Hui Kwan, these two addresses were the last known addresses of the Defendant at the time when the documents were served.

14.As mentioned, the Defendant had contested the Mainland Proceedings commenced by P1 which was similarly for a declaration that the Defendant held the shareholdings in the Company for P1. Given the lack of evidence on how the process servers derived their knowledge that the addresses for service were the last known addresses of the Defendant as asserted, I directed that further affidavit evidence be filed by the Plaintiffs to verify that the Yuk Yat Street Address and the Lok Shan Road Address were and still are the last known addresses of the Defendant and that no further oral hearing would be required.

15.On 2 March 2026, the Plaintiffs filed the Affirmation of Chan Kai Hung Alfred, solicitor of the Plaintiffs, in which the following are stated:

(1) According to the annual returns of the Company for 2024 and 2025, the Defendant’s address in his capacity as shareholder was the Yuk Yat Street Address and as director the Lok Shan Road Address;

(2) In the judgments of the Mainland Proceedings, the Defendant was identified as a Hong Kong permanent resident residing at the Yuk Yat Street Address; and

(3) To the Plaintiffs’ knowledge, the Defendant has all along been living and working in Hong Kong.

16.Having considered the above, I am satisfied that the Defendant has been duly served with the Amended Writ indorsed with Statement of Claim and all documents for the present application. The Defendant having failed to file any notice of intention to defend or any Defence, I proceed to consider whether default judgment for the reliefs sought should be granted to the Plaintiffs.

IV. Legal Principles

(1) Default Judgment

17.The legal principles on granting default judgment for declaratory reliefs under Order 19 rule 7 are well established and the relevant ones as helpfully summarised by DHCJ William Wong SC in Times Square Limited v Lee Kwun Kit trading as JL Music & Anor [1] are the following:

(1) In determining whether to grant default judgment, the court must consider the application according to the pleadings alone, and decide whether the plaintiff appears to be entitled to judgment on its statement of claim[2];

(2) The power to grant default judgment is discretionary and not mandatory[3]; and

(3) As to declaratory relief,

(i) it is not the normal practice of the court to grant a declaration without going to trial; this is, however, only a rule of practice, rather than a rule of law, and gives way to the paramount duty of the court to do the “fullest justice to the plaintiff to which he is entitled”[4]; and

(ii) it would be granted if there is a genuine need for it[5].

(2) Bare Trust

18.In Hotung & Anor v Ho Yuen Ki [6], the Court of Appeal examined the nature of a bare trust:-

“Bare Trust

13. We will now examine the nature of a bare or simple trust. It is one in which property is vested in one person on trust for another, the nature of the trust not being prescribed by the settlor but being left to the construction of the law, as where property is transferred to T ‘on trust for B absolutely.’ In such a case, T must permit B to enjoy the property, and must obey his instructions as to disposing of it. …

14. A bare or simple trustee, especially of shares in a limited company, is often called a nominee. He is a mere name or dummy for the true owner: Lewis on Trusts 17^th Ed., paragraph 1-21.

15. In case of bare trustee, the beneficiary may call for a conveyance of the legal estate at any time, and the trustee must comply. In the meantime the trustee has no duties to perform and must deal with the trust property in accordance with the instructions of the beneficiary: Hanbury & Martin on Modern Equity 16^th Ed. page 71.

16. A simple trust is a trust in which the trustee is a mere repository of the trust property, with no active management duties to perform. Such a trustee is called a bare trustee. The trustee of a simple trust is regarded as a bare trustee or agent or nominee. Where a trustee holds property for a beneficiary or beneficiaries absolutely entitled to call for the property to be transferred to them or at their direction under the rule in Saunders v Vautier, but until such call has powers and discretions to exercise, then he will be an active trustee and not an agent or nominee or bare trustee. However, usage of the term ‘bare trustee’ may extend in context to trusts where beneficiaries are absolutely entitled under the rule in Saunders v Vautier, so the property is held to their order: Underhill and Hayton: Law Relating to Trusts and Trustees 15^th Ed., pages 44 and 45.

17. In Halsbury’s Laws of England 4^th Ed. 2000 Reissue Vol. 48, para. 650, a bare trustee is described as ‘a person who holds property in trust for the absolute benefit and at the absolute disposal of other persons who are of full age and sui juris in respect of it, and who has himself no present beneficial interest in it and no duties to perform in respect of it except to convey or transfer it to persons entitled to hold it, and he is bound to convey or transfer the property accordingly when required to do so.’”

V. Declaration

19.On the facts pleaded in the Statement of Claim, I am satisfied that the Respective Share holdings in the Company were held by the Defendant for the Plaintiffs as bare trustee. To reflect the proprietary rights of the Plaintiffs and to do the fullest justice to them, the Declaration sought should be granted.

VI. Execution Order

20.A bare trustee is bound to transfer the property to the beneficiary when required to do so. I therefore order the Defendant to execute all documents as may be necessary (including but not limited to instruments of transfer and bought and sold notes) to transfer the Respective Shareholdings in the Company to the Plaintiffs.

21.In their Summons, the Plaintiffs ask that the Registrar be appointed to execute the documents in the event that the Defendant does not do so pursuant to section 38A of the DCO which provides:

“38A. Execution of instruments by order of the Court

(1) Subsection (2) applies where—

(a) the Court has given or made a judgment or order directing a person to—

(i) execute any conveyance, contract or other document; or

(ii) endorse any negotiable instrument; and

(b) that person—

(i) neglects or refuses to comply with the judgment or order; or

(ii) cannot, after reasonable inquiry, be found.

(2) The Court may, on such terms and conditions, if any, as may be just, order that the conveyance, contract or other document is to be executed, or that the negotiable instrument is to be endorsed, by such person as the Court may nominate for that purpose.

(3) A conveyance, contract, document or instrument executed or endorsed in accordance with subsection (2) has the same effect as if it had been executed or endorsed by the person originally directed to execute or endorse it.

(4) Nothing in this section abridges the powers of the Court to proceed by attachment against any person neglecting or refusing to execute or endorse any such instrument.”

22.In Chong Chi Ting Chris v The Incorporated Owners of Kin On Building & ors [7], Deputy District Judge Louise Chan considered the order to be made under section 38A of the DCO and said, at §25:

“25. As such, the appointment of the Registrar is merely a mechanism to deal with the contingency of the Plaintiff not being able to obtain necessary cooperation from the defendants, and thus to effect a valid conveyance of the Property in favour of the Plaintiff. The Registrar is not the only person that the Court is entitled to nominate, and in fact the current practice is that the Court would not appoint the Registrar to execute the document unless for special or exceptional circumstances. See Chen Yuen Ngai Kenneth and Chan Mei Mei v Ho Yuk Wah David [2021] HKCFI 1113, Kwok Lai Kwan Rosena v Kwok Biu & Anor [2023] HKCFI 17”

23.I agree with the learned Deputy Judge. In the present case, a solicitor to be nominated by the Plaintiffs should be appointed to execute the documents under section 38A.

CONCLUSION

24.For the above reasons, I would grant default judgment against the Defendant and make the following orders:

(1) A Declaration that the Defendant was at all material times and still is a bare trustee holding the shares in the Company on behalf of the 1^st to 6^th Plaintiff as follows:

(i) 6,500 shares for the 1^st Plaintiff;

(ii) 600 shares for the 2^nd Plaintiff;

(iii) 100 shares for the 3^rd Plaintiff;

(iv) 100 shares for the 4^th Plaintiff;

(v) 50 shares for the 5^th Plaintiff; and

(vi) 50 shares for the 6^th Plaintiff;

(2) An Order that the Defendant do execute all necessary documents as may be necessary (including but not limited to instruments of transfer and bought and sold notes) to transfer the respective shares in the Company to the 1^st to 6^th Plaintiffs at nil consideration within 14 days from the date of service of this Order, failing which Mr Chan Kai Hung, Alfred, a senior consultant of Messrs Guantao & Chow, solicitors for the Plaintiffs, be appointed to execute all necessary documents to transfer the Defendant’s shareholdings in the Company to the 1^st to 6^th Plaintiffs under section 38A of the District Court Ordinance (Cap 336); and

(3) There be liberty to apply.

25.Costs should follow the event. I therefore order that costs of the application including all costs reserved be paid by the Defendant to the 1^st to 6^th Plaintiffs summarily assessed at HK$108,000.

Mr Timothy Lam, instructed by Guantao & Chow Solicitors and Notaries, for the 1^st to 6^th Plaintiffs

The Defendant was not represented and did not appear