Electronic Control Technology Ltd v. Cobo Asia Ltd and Another

HCMP 362/2021

[2026] HKCFI 6035

HCMP 362/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 362 OF 2021

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J U D G M E N T[1]

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1.By judgment handed down on 12 May 2026, this Court made a buy-out order (“BO Order”) requiring Cobo SPA to purchase ECT’s 40% shareholding in the Company at its fair market value on the basis that the Company is a going concern and without any minority discount[2]. 

2.At §§265-269 of the Main Judgment, this Court considered the respective contentions of the parties on the date of valuation, and stated its preliminary view that:

(1)  The date of valuation should be the date of the 2020 Board Meeting (20 October 2020) given that from that date onwards, there was Diversion of Business to the prejudice of the Company, and the loss suffered by the Company from such conduct is difficult to assess and quantify; and

(2)  There should be adjustment to the value of the Company to reflect the fact that Cobo GZ’s business/operations were paralysed during the period from March 2021 to 9 June 2022 (“Cobo GZ Paralysis”).  How the adjustment is to be made is a matter to be considered by the valuer, and the parties may take issue on the valuer’s opinion on the adjustment.

3.This Court directed the parties to reflect on the issue and make further submissions at a directions hearing in the event they disagree with the preliminary view, and to make submissions on the questions of (1) the appropriate date of valuation; (2) whether any further adjustments need to be made to the valuation; (3) interest on the price of buying out ECT’s shares; and (4) the directions for appointment of Court-appointed expert to assess the fair market value of the Company along the parameters set forth in the Main Judgment.[3]

4.At the hearing, ECT’s stance is that it agrees with the court’s preliminary view whereas Cobo SPA’s stance is that the date of valuation should be the date of the BO Order.  Consequently, the parties make submissions on the 4 questions identified above. 

5.Shortly before the hearing, Cobo SPA issued a summons dated 19 August 2026 for leave to adduce an affidavit of Linetti which contains (1) a summary of what he believes to be the court’s findings and preliminary view; (2) his analysis on Diversion of Business loss and the effect of Cobo GZ Paralysis; (3) his contention that it is a “relatively straightforward computational exercise” to assess and quantify the loss suffered by the Company as a result of Diversion of Business; (4) his submission that an assessment of the effect of Cobo GZ Paralysis “would be much more widespread, multi-dimensional, and difficult to quantify with precision”; (5) his argument that a valuation date post-Cobo GZ Paralysis together with an adjustment for Diversion of Business “would be more practical and involve fewer speculative adjustments”; and (6) his confirmation that the Majority Camp “is willing and ready to disclose the financial statements of Cobo GZ to the valuer and ECT in the upcoming valuation exercise”, and will ensure “complete transparency” in making available all financial information required by the valuer.  In respect of (3)-(5), reliance is placed on the opinion rendered by Mr. Cosimo Borrelli in his letter dated 9 August 2026. 

6.I dismiss the summons at the hearing with costs to be paid by Cobo SPA to ECT.  As stated in the Main Judgment, this Court gave liberty to the parties to make submissions at a directions hearing on the 4 questions identified.  The hearing is not the occasion for any party to adduce any new evidence, let alone an opinion on how valuation should be conducted.  The affidavit is also objectionable.  All that the affidavit does is to set out the arguments, submissions and opinions on the date of valuation, which fall foul of the requirement of Order 41 rule 1 of the Rules of the High Court.  As submitted by Mr Martin Ho, the court has repeatedly emphasised that affidavits must contain facts within the deponent’s knowledge, not arguments or submissions (CS v HKR [2025] 2 HKC 340 §§8-10; Eugene Jae-hoon Oh v Kate Gaskell Richdale [2003] 4 HKC 318 §§15-16). 

7.I consider the 4 questions in turn.

Date of Valuation

8.There is no real dispute on the applicable principles. 

9.The starting point is that an interest in a going concern ought to be valued at the date on which it is ordered to be purchased, subject to the overriding requirement that valuation should be fair on the facts of the particular case (Profinance Trust SA v Gladstone [2002] 1 WLR 1024 §§60-61; Main Judgment §265(2)). 

10.In Re Sound Global Ltd [2025] HKCFI 2052, this Court summarised the principles governing the date of valuation of a company which is a going concern (§22):

(1)  If the company’s business has not been affected by the unfairly prejudicial conduct and it continues to carry on the business up to the date of the buy-out order, it would usually be fair for the valuation to be conducted as at the date of the order.  This is because any profit generated (or loss sustained) by the company in the meantime will be reflected in the valuation, which would necessarily have taken into account and reflected both the upside and downside of the business. 

(2)  If the business of the company has been adversely affected by the unfairly prejudicial conduct, and the adverse effect is one which can be ascertained and quantified, it would still be fair for valuation to be made as at the date of the order with adjustments made to the valuation.  In making the adjustments, the court is in effect reversing the financial impact of the unfair prejudice.

(3)  If, however, the adverse effect is not one which can be ascertained or quantified, so that it is not possible to reverse the unfair prejudice by making adjustments to the valuation, the court would either adopt the date which pre-dated the unfairly prejudicial conduct or the date of the petition.  Very often, the reason for adopting the date of the petition is because that was the date when the petitioner decided to exit from the company.

(4)  The appropriate date of valuation is decided by the court based on the findings of unfair prejudice and the circumstances faced by the company in question.

11.Mr Henry Cheng contends that a petitioner is not entitled to a “one-way bet”, and must normally take the rough with the smooth, and the minority shareholder cannot pick and choose an exit date which is most advantageous to him (Dinglis v Dinglis [2019] EWHC 3327 §§64, 66).  Mr Ho does not dispute this.  He submits that an earlier valuation date simply reflects what is fair on the facts of this case, especially when ECT has been kept in the dark as to the latest financial position of Cobo GZ, which is the Company’s most significant asset. 

12.Mr Ho agrees with this Court’s preliminary view that the valuation date should be 20 October 2020 for the following reasons.

13.First, an earlier valuation date is appropriate where a company has been deprived of its business, and the effect is not one which can be ascertained or quantified easily (Re Sound Global Ltd §22(3)).  This approach aligns with the authorities, such as:

(1)  Re PHB Ethical Beauty Ltd [2025] 1 BCLC 433 where unfairly prejudicial conduct has deprived the company of its business or assets, fairness requires valuation at a point before the misconduct began.  It is, as the court put it, “the simplest method” of undoing the prejudice (§§38, 45-47).

(2)  Re Integrated Control Solutions (Eastern) Ltd [2021] EWHC 1374 (Ch) where the court adopted an earlier date for valuation on the basis that the petitioner has been excluded for 3 years during which the respondent treated the company as his own (§§244, 246(i)-(ii)).

(3)  Re Phoenix Contracts (Leicester) Ltd [2010] EWHC 2375 (Ch) where it was unclear whether the respondent’s conduct after the date of unfairly prejudicial conduct had caused diminution in the value of the shares, and it would be unfair for the petitioner to assume the burden of such risk (§§150, 157(i)-(ii)).

(4)  Profinance Trust SA §61[4] where Robert Walker LJ observed that the court may adopt an earlier valuation date with compensating adjustments in fairness to one or both parties where (a) a company has been deprived of its business, in fairness to the claimant; and (b) a company has been reconstructed or its business has changed significantly, so that it has become a new economic identity, an early valuation date may be required in fairness to one or both parties.

14.Second, as this Court observed on Day 9,[5] it is no easy task to identify with precision the impact of Diversion of Business given that:

(1)  The Company and Cobo GZ have since February 2021 been operated by the Majority Camp without any involvement of ECT[6]. A current valuation would risk depressing the value of ECT’s shares by reference to decisions taken exclusively by the Majority Camp.

(2)  Liang/ECT have been kept in the dark as to the financial information, business operations and performance of Cobo GZ.  It would be extremely unfair to require ECT to bear the economic consequences of business decisions made by the Majority Camp.

15.Third, insofar as it is suggested that the disruption of Cobo GZ’s operations is relevant to valuation (which is denied), that reinforces the case for adopting 20 October 2020 as valuation date given that:

(1)  It avoids the need to apportion responsibility between the camps, especially when the question of Liang’s precise contribution to the disruption is the subject of litigations in the Mainland. 

(2)  The Main Judgment did not lay all blame at Liang’s door for the post‑February 2021 operational issues.  It recognised that “the revenue and profits [may] have declined due to the way the Majority Camp managed the business of the Company/Cobo GZ”, and if so, “such decline should be borne by Cobo SPA alone and should not affect the value of” the Company (Main Judgment §267(2)).

(3)  Similar approach was adopted in Integrated Control Solutions  §246(iii), where the court found that both sides were at fault, and a later valuation date would be inappropriate given that it would involve making complex adjustments and a “detailed accounting exercise” that is not proportionate.

(4)  Here, the date of 20 October 2020 supplies a clean and objective marker, avoiding the need for elaborate adjustments to reflect the parties’ respective contributions to Cobo GZ’s subsequent operational disruption.

16.Fourth, it is highly questionable whether any later valuation date could be workable in practice, as observed in the Main Judgment §267(3):

(1)  A later date would demand full financial transparency from the Majority Camp so that the valuer can account for Diversion of Business and Cobo GZ Paralysis. 

(2)  It is doubtful that the Majority Camp would willingly provide extensive disclosure of financial and other relevant documents for valuation purposes, particularly when ECT is ex hypothesi being bought out of the Cobo Group, and serious allegations of competition have been levelled against Liang and the companies associated with him. 

(3)  Adopting 20 October 2020 would avoid the disclosure morass, sidestep the need for complex adjustments, and fix the valuation at a point before the misconduct took place.

17.On the other hand, Mr Cheng contends that the appropriate date of valuation is the date of the BO Order for the following reasons.

18.First, Diversion of Business can be ascertained and quantified because:

(1)  Diversion of Business only took place from 26 October 2020 to 20 February 2021.  As Cobo GZ Paralysis began on 20 February 2021[7], the direct sale of any products to Cobo GZ was no longer feasible.  In any event, the Majority Camp’s evidence at trial is that by 2023, the Family Products were again sold through the Company[8].

(2)  Diversion of Business was limited to 3 specific Family Products (i.e. steering column kits, Display Canview4, and Traction Modules)[9]. If one considers the year 2020 as put forward by ECT, the Company’s sale of Family Products to Cobo GZ only constituted 5.37% of its total sales to Cobo GZ for that year, with a gross profit of only EUR 303,503.47[10].

(3)  Diversion of Business only had minimal involvement of external parties (i.e. external suppliers or customers), such that there is likely to be minimal lost or damaged relationships with such parties which may be intangible or difficult to assess and quantify.

(4)  The above is supported by Mr Borrelli’s view, who opines that the work necessary for reconstructing Diversion of Business is relatively limited and includes review and assessment of available documentation involved in the direct sales of Family Products.

19.Second, the fact that ECT has not been involved in the management of the Company is not a consideration as the Company was not a quasi-partnership and there was no Fundamental Understanding that ECT would be entitled to participate in the management[11]. Any change in the value of the Company should be enjoyed or borne by both shareholders.

20.Third, there would be transparency in the valuation given that (1) the Majority Camp confirms that it shall provide full financial statements of Cobo GZ to the valuer and ECT in the valuation exercise[12]; and (2) Cobo SPA accepts that it is appropriate for the court to make the standard directions on valuation, which require full transparency from the parties. 

21.Fourth, fairness requires the court to take into account Cobo GZ Paralysis which started because Liang disputed the authority of Lamantia and made known such dispute to the Landlord[13]. Cobo GZ  Paralysis “caused substantial disruption to Cobo GZ’s business and operations”[14] and lasted over 15 months (from 20 February 2021 to 9 June 2022[15]).  It would be more difficult to assess and quantify the impact of a complete paralysis for a period of 15 months, as opined by Mr Borrelli. 

22.Having considered the further submissions and arguments advanced by counsel for ECT and Cobo SPA, I remain of the view that the appropriate date of valuation should be 20 October 2020 for the reasons explained below. 

23.The date of 20 October 2020 was the date when Diversion of Business first took place.  At that time, Liang was a director and GM of the Company and was entitled to participate in the management of the Company in that capacity.  The conduct of the Majority Camp in unilaterally deciding and pushing through the direct sale of Family Products to Cobo GZ contrary to the modus operandi and without any prior consultation or discussion with Liang is found to be unfair and prejudicial to the interests of the Company.  This is particularly so when the Majority Camp has never attempted to address the objections raised by Liang and insisted on implementing the 2020 Board Resolutions.  

24.In these circumstances, prima facie fairness requires that valuation should be made as at the date when the unfairly prejudicial conduct commenced.  It is for Cobo SPA to satisfy the court that despite the unfairly prejudicial conduct, it is fair for valuation to be conducted as at a later date.  Mr Cheng advances 3 main reasons in support of his contention that the date of the BO Order is the fair valuation date. 

25.The first reason is Mr Cheng’s contention that Diversion of Business was of limited duration, involved limited products or that it only accounted for a small percentage of the Company’s revenue and profits.  I do not think that it is open to Cobo SPA to advance such contention given that:

(1)  The Majority Camp had not pleaded such defence and, therefore, it was not an issue which ECT had to deal with at the trial. 

(2)  Had Cobo SPA advanced such defence and adduced evidence to make good the defence, it would have been opened to Cobo SPA to argue that the unfairly prejudicial conduct had come to an end as the Company had been able to generate revenue in accordance with the modus operandi long before the trial.  No such defence has been pleaded let alone proved at trial.  Indeed, no financial statements of the Company, audited or unaudited, after 2022 were disclosed by the Majority Camp.  Consequently, this Court did not make any finding on the duration and quantity of Family Products involved or the loss of revenue suffered by the Company as a result of Diversion of Business.  

(3)  In the absence of any finding on the duration and quantity of the products involved and the loss of revenue suffered by the Company, it would not be possible for the valuer to assess and quantify the loss suffered by the Company in Diversion of Business.  The valuation exercise is not the occasion for Cobo SPA to re-open and re-argue Diversion of Business.  Nor is it an occasion for the valuer to make any finding on such issue.

(4)  Although the Majority Camp confirms that it is willing to provide full transparency to the valuer in assessing the value of the Company, such confirmation is, as described by Mr Ho, too little and too late.  Since February 2021, ECT has not been provided with any meaningful information about the Company/Cobo GZ and has no means to know whether there has been any further irregular transactions.  It would be unfair to subject ECT to the onerous task of having to go through all the documents and identify all irregular transactions from the documents to be disclosed by Cobo SPA for the purpose of valuation even if this can be done.  If irregular transactions are identified, the valuer will not be in a position, as it is not the function of the valuer, to make any determination or finding on any such irregular transactions.  

26.The second reason raised by Cobo SPA is the difficulty in quantifying the loss suffered by Cobo GZ as a result of the closure of the Premises (i.e. Cobo GZ Paralysis).[16]  This too is not a valid reason for adopting a later valuation date:

(1)  As pointed out by Mr Ho, the issue whether Liang should be liable to pay any compensation to Cobo GZ for the closure of the Premises has been the subject matter of the claims brought by Cobo GZ against Liang in the Mainland court. 

(2)  It is Lamantia’s evidence that Cobo GZ had commenced legal proceedings in the Mainland against Liang for the loss suffered from the closure of the Premises.  Although the first action had been dismissed by the Mainland court, the Majority Camp planned to commence another litigation against Liang (and WH Liang) to recover the loss suffered[17]. 

(3)  At the directions hearing, both counsel confirm that the new proceeding has since been commenced and remains ongoing.  Thus, if and to the extent that the Mainland court finds that Liang has acted in breach of his duties or otherwise has caused loss to Cobo GZ, such loss will be recovered by Cobo GZ in that proceeding.  It is not a matter relevant to the date of valuation. 

27.The third reason advanced by Mr Cheng is that if the valuation date is fixed at 20 October 2020, it would result in a “one-way bet”.  I disagree: 

(1)  In assessing the fair value of the Company, the valuer has to consider not only the profitability of the Company in the past, but also the nature of its business, the condition of the industry and the specific circumstances of the Company. 

(2)  Both parties have the opportunity to challenge the valuation report at the trial on valuation.  There is no basis to assume or speculate that the market value as assessed by the valuer would necessarily be a “one-way bet” or that it would result in an artificial or inflated value in favour of ECT. 

28.Cobo SPA has not articulated any reason as to why a valuation as at the date of the BO Order would be fair to both shareholders:

(1)  The Company has since 29 January 2021 been under the exclusive management and control of the Majority Camp.  While ECT has no contractual right to insist on having Liang to be appointed as a director of the Company or Cobo GZ, the fact remains that since Liang ceased to be a director and GM of the Company and Cobo GZ on 29 January 2021, no meaningful financial information has been provided to ECT. 

(2)  Although the Majority Camp had provided the 2021 and 2022 AFS to ECT, such AFS did not include any consolidated financial statements of the Company and Cobo GZ.  It was impossible for ECT (qua shareholder) to scrutinise the results of the Company and Cobo GZ or to require the directors nominated by Cobo SPA to account for the financial performance of the Company and Cobo GZ.

(3)  Not only was there a complete lack of transparency on the financial performance of the Company/Cobo GZ, there was no averment or evidence to show that after the 2020 Board Meeting, the Majority Camp continued to manage the Company/Cobo GZ following the modus operandi or in any other way which can be said to be beneficial or in the interests of such companies. 

(4)  That being the position, it is difficult to see why the court should adopt a valuation date after the 2020 Board Meeting when the business and operations of the Company and Cobo GZ were managed exclusively by the Majority Camp.  If and to the extent that the revenue and profits have declined due to the way the Majority Camp managed the business of the Company/Cobo GZ, such decline should be borne by Cobo SPA alone.  Fairness requires that the Majority Camp should take the consequence of the manner in which they decided to manage the business and operations of the Company and Cobo GZ.  

29.Mr Cheng also puts forward an alternative position, and suggests that the appropriate valuation should be a date not earlier than 9 June 2022 given that:

(1)  This is the date when Cobo GZ regained possession of the Premises[18].  Whilst the effect of Cobo GZ Paralysis continued well past the end of the closure of the Premises, a valuation date after 9 June 2022 can at least ensure that the immediate impact of the closure is captured in the Company’s financial position at that time, and minimises the uncertainty of applying a post-valuation date adjustment for Cobo GZ Paralysis.

(2)  Diversion of Business loss would still be separately quantified and adjusted in the valuation.

30.I have no hesitation in rejecting the alternative date puts forward by Mr Cheng, which bears no relevance to the unfairly prejudicial conduct found by this Court or the fact that since the 2020 Board Meeting, Liang has effectively been sidelined by the Majority Camp.

31.For all the above reasons, I consider that 20 October 2020 is a fair valuation date in the circumstances of this case.

Adjustments to valuation

32.Mr Ho submits that if this Court adopts 20 October 2020 as the valuation date, no further adjustment is necessary to achieve a fair and just result, taking into account the following matters:

(1)  As a matter of principle and logic, a valuation fixed by reference to 20 October 2020 must rest on the facts known or reasonably foreseeable as at that date.  Cobo GZ Paralysis did not begin until March 2021.  A willing buyer and a willing seller on 20 October 2020 could not have anticipated, and would not have priced in, an administrative handover dispute months down the line.  This is fortified by Dinglis v Dinglis [2020] EWHC 1363 (Ch) where the court declined to allow downward adjustment for Covid-related losses which arose after the valuation date (§§18-20, 33, 51); and JP Morgan International Finance Ltd v Werealize.Com Ltd [2025] BCC 570 where the court addressed the “reality principle” regarding fair market value and held that events which postdate the valuation date cannot generally be taken into account (§§63-64).

(2)  The Majority Camp has already commenced proceedings in the Mainland against Liang to recover the loss suffered in Cobo SPA Paralysis.  There is no unfairness to Cobo SPA as it was the Majority Camp’s decision to pursue Cobo GZ’s remedy in the Mainland court.  If adjustment is made to valuation in respect of Cobo SPA Paralysis, that would risk double-counting and confer an unwarranted windfall on the Majority Camp.

(3)  It would be wrong in principle for the Majority Camp to invite this Court to place weight on Liang’s role in Cobo GZ Paralysis, when this Court has (rightly) declined to entertain the Majority Camp’s attempt to raise the same matter at the “liability” stage on the basis that no “clean hands” defence had been pleaded[19].  The point carries particular force where the Majority Camp has not pleaded that any wrongdoing on Liang’s part should result in a downward adjustment to the valuation of ECT’s shares.

(4)  The authorities establish that the very purpose of selecting an earlier valuation date is to protect the minority from the consequences of subsequent deterioration in the company’s position where that deterioration is difficult or inappropriate to quantify.  It would cut across that protective purpose to import into a 20 October 2020 valuation an adjustment for Cobo GZ Paralysis (which itself has no bearing on the proper valuation as at 20 October 2020), particularly where it remains unclear whether, and to what extent, Liang contributed to that Paralysis.

33.Mr Cheng contends that if this Court adopts the valuation date of 20 October 2020, an adjustment must be made to reflect the effect of Cobo GZ Paralysis because:

(1)  The Court found that Liang brought about Cobo GZ Paralysis[20]. The finding cannot be side-stepped by recasting Cobo GZ Paralysis as a post-valuation date event of no relevance to the fair value of the Company.  The court has a very wide discretion to do what is considered fair and equitable in all the circumstances of the case (Re Bird Precision Bellows Ltd [1986] Ch 658 at 669e).  

(2)  Although there is pending proceeding between Cobo GZ and Liang in the Mainland court, this is a process separate to the present proceedings.  There is no evidence on the considerations involved in those proceedings.  Even if any compensation is ultimately payable to Cobo GZ, such compensation will be in the form of damages to Cobo GZ.  It cannot be equated with the depression in the value of the Company. 

(3)  The fact that no “clean hands” defence has been pleaded is neither here nor there.  The “clean hands” defence referred to in §124 of Main Judgment would have constituted a substantive defence to ECT’s allegations of unfair prejudice which would bar ECT from obtaining any relief.  Cobo SPA does not seek to defeat the BO Order, but seeks to ensure that the valuation reflects what the court has found, that is, the Company’s value was depressed by Cobo GZ Paralysis and that Liang was responsible for that Paralysis.

(4)  Here, there is undeniably a decline in the value of the Company as a result of Cobo GZ Paralysis which was caused by ECT’s own conduct.  It would be manifestly unfair to Cobo SPA if ECT is paid a valuation that ignores such decline.

34.I agree with Mr Ho ’s submissions.  As a matter of principle, it is not appropriate to make adjustment for Cobo GZ Paralysis as it post-dated the valuation date.  More importantly, the question whether Liang committed any wrongdoing and should be liable to compensate Cobo GZ for the loss suffered in Cobo GZ Paralysis have been the subject matters of the proceedings brought by the Majority Camp against Liang in the Mainland court.  Having decided to commence separate proceedings against Liang in the Mainland court, it is not properly open to Cobo SPA to contend that this Court should allow an adjustment to the valuation irrespective of the outcome of the proceedings in the Mainland. 

35.I hold that no further adjustment to the valuation is necessary.

Interest on buy-out price

36.The applicable principles are well-established:

(1)  In the context of unfair prejudice petition, interest (or quasi-interest) is a proxy to measure the increment in the value of the petitioner’s investment in the company appropriate to reflect the fact that the respondents had the use of the petitioner’s investment since the valuation date (Re Goldsfine Development Ltd [2013] 5 HKLRD 318 §§17-19, 23, Re Tai Lap Investment Co Ltd [1999] 1 HKLRD 384, 402J). 

(2)  The award of “quasi-interest” is not an invariable rule.  The question remains whether, as a matter of fairness, the petitioner should be awarded any interest on the price at which the respondents are to purchase his shares (Re Maxtop International Investment Ltd [2014] 4 HKLRD 416 §7).

(3)  The issue of quasi-interest is logically anterior to the choice of valuation date.  An award of quasi-interest would be appropriate where the petitioner has been locked up in its investment in the company but has not received any benefit from his membership, whether by way of dividends or director’s remuneration (Profinance Trust SA §30).

(4)  Interest would be awarded from the date of valuation on the basis that from that point, the minority shareholders have been unable to realise their shares through the Stock Exchange and should be compensated for being kept out of that value.  Without interest, the controller would able to retain control over the company and any undistributed profits generated in the meantime (Re Sound Global §37(1)-(2)).

37.Mr Cheng raises a pleading point.  He submits that:

(1)  Where a petitioner “seeks a valuation at a relatively early date augmented by the equivalent of interest, he must put forward that claim clearly and persuade the court by evidence that it is the only way, or the best way, to a fair result, and such claim should not be made as a “last minute after-thought” (Profinance Trust SA, §32, applied in Re Lehmanbrown Ltd, CACV 272/2011, 13 March 2013 §94). 

(2)  While interest has been claimed at §(1) of the prayer, the claim is only made generally.  There is no specific plea for pre-judgment interest, nor the facts in support of such interest.  

38.There is no merit in the pleading point.

(1)  As pointed out by Mr Ho, in prayer (1), there is a specific plea on the purchase price at a fair value to be determined by the court as at the valuation date, without any discount and with adjustment (described as “premium”) to reflect the loss suffered by the Company as a result of the unfairly prejudicial conduct pleaded, and with interest.  This is a specific claim for interest. 

(2)  The suggestion that ECT has to plead pre-judgment interest or the fact in support of such interest is inconsistent with the nature of the quasi-interest awarded by the court in unfair prejudice petition.  In Profinance (§32), the court emphasized that a petitioner must put forward a claim for interest “clearly and persuade the court by evidence that it is the only way, or the best way, to a fair result.  It should not be a last-minute afterthought”.  As interest has been specifically claimed in the prayer for a buy-out order, it cannot be said to be an afterthought.  As regards evidence to show that the claim for interest is the only or the best way to a fair result, this has been done.  All that ECT asks this Court to do is to refer to the fact that since the 2020 Board Meeting, the Company/Cobo GZ have effectively been managed by the Majority Camp exclusively, and no dividend or director’s remuneration has been paid to ECT or Liang.  

(3)  Unlike Profinance Trust SA §32 where Robert Walker LJ noted that evidence would be required unless the petitioner is merely seeking simple interest at a normal rate,[21]  the normal rate of interest in this context (prime lending rate plus 1%) represents the theoretical cost of borrowing the sum in question (Polyset Ltd v Panhandat Ltd FACV 28/2000, 25 April 2002, §13 (Ribeiro PJ); Lo Yuk Sui v Fubon Bank (Hong Kong) Ltd [2019] HKCA 1345 §34). 

39.In my judgment, interest should be awarded on the price to be paid by Cobo SPA for purchasing ECT’s shares from the date of valuation (20 October 2020) up to the date of the determination on the buy-out price (“Intervening Period”) for the reasons explained below.

40.First, after 20 October 2020, ECT did not receive any  benefit qua shareholder in that no dividend or information concerning the Company or Cobo GZ was provided by the Majority Camp[22]. This is a classic situation where the minority shareholder did not receive any benefit from its membership from the date of valuation discussed in Profinance Trust SA (§30).

41.Second, the BO Order was made on 12 May 2026, unless  interest is allowed, Cobo SPA would effectively be able to purchase ECT’s shares at a value fixed by reference to 20 October 2020 without having to pay anything on the ability to use and control ECT’s investment during the Intervening Period.  This would not be fair (Re Goldsfine §§23, 25).  As submitted by Mr Ho, such quasi-interest compensates ECT for Cobo SPA’s continued use of ECT’s capital which, but for the unfair prejudice, it ought in fairness to have been released.  This is the type of unfairness addressed in Re Sound Global §37.

42.Third, it is also fair to award interest as a proxy for the return on ECT’s investment under the exclusive stewardship of Cobo SPA during the Intervening Period:

(1)  If the financial performance of the Company/Cobo GZ under their management was good, Cobo SPA would be able to keep all the benefits including the profits generated by the companies without having to account or share the same with ECT. 

(2)  Conversely, if the financial performance of the Company/Cobo GZ was poor, that was the result of Cobo SPA having chosen to run the business without the involvement of ECT/Liang, and it would be fair for Cobo SPA to bear the consequence of its own decision. 

43.Fourth, an award of interest on the purchase price would achieve a clean break between the parties once and for all:

(1)  As a member of the Company during the Intervening Period, ECT is entitled to require Cobo SPA to account for the financial performance of the Company/Cobo GZ after having been provided with the relevant financial information (which has been withheld from it).  ECT is also entitled to require Cobo SPA to justify all the payments and expenses made by the Company/Cobo GZ to the companies within Cobo SPA group on the basis that they were related parties transactions.  Such rights may not be extinguished by the BO Order as ECT may contend that it had no visibility over the affairs of the Company/Cobo GZ during the Intervening Period such that it did not have the opportunity to pursue such rights.

(2)  ECT has the statutory right, as a past member[23], to bring fresh unfair prejudice proceedings under s.724 of the Companies Ordinance (Cap.622) (“Ordinance”) against the Majority Camp in respect of the affairs of the Company during the Intervening Period on the basis that it has not received any benefit qua member. 

(3)  If interest on purchase price is awarded as a proxy for ECT’s return on the investment in the Company during the Intervening Period, it would be said against ECT that since 20 October 2020, it has ceased to have any real economic interests in the Company (and hence Cobo GZ).  It follows that ECT has no real interests in bringing any further proceedings against Cobo SPA in respect of the affairs of the Company/Cobo GZ during the Intervening Period.

(4)  It must be in the interests of all parties to avoid the time and costs of having to deal with yet another set of unfair prejudice proceedings concerning the Company/Cobo GZ during the Intervening Period.

44.Fifth, it was open to Cobo SPA to make an offer to buy out ECT’s shares in the Company on the bases it considered appropriate and to pay the price for such shares without prejudice to the question of costs and interest and tender payment to ECT.  Had this been done, Cobo SPA would have been able to protect against the risk of having to pay interest on the buy-out price for the Intervening Period.  This has not been done and no reason has been articulated as to why Cobo SPA could not do so. 

45.I do not accept Mr Cheng’s argument that “to justify an award of quasi-interest, it would be necessary for the petitioner to demonstrate that he suffered some other or additional financial loss as a result of the unfairly prejudicial conduct”, citing Re Money Facts Ltd [2025] HKCFI 1009 §17 and Krishna Holdco Ltd v Gowrie Holdings Ltd [2025] EWHC 1542 (Ch) at §§233-234.

(1)  In Money Facts, Harris J expressed reservation about the reasoning in Re Tai Lap Investment, observing that “Le Pichon J seems to have assumed that by choosing an earlier valuation date, she was making a finding that the petitioner was entitled to be paid at that date and as he was not, it was fair to order interest.  That seems to me to ignore the distinction I have explained earlier and to conflate price and loss” (§18).  His view was that a historic valuation date concerns the valuation of the shares while an interest award  compensates the petitioner for being kept out of money or for a further financial loss.  On that analysis, the petitioner must show why interest is necessary (§§16-17).  In Harris J’s opinion, Re Tai Lap Investment conflated two different issues: (a) the date used to value the shares and (b) the date from which the petitioner should be treated as having been deprived of money.

(2)  Re Money Facts does not assist Cobo SPA.  In that case, “the petitioner has not been kept out of management and deprived of a salary or director’s fees”.  It was in that context that Harris J had to consider “whether awarding interest for the period sought is justified because the petitioner has not had the use of the value of the shares (i.e. the purchase price)” (§14). 

(3)  In any event, it is unnecessary to resolve any tension between Re Money Facts and Re Tai Lap Investment as interest is not awarded on the basis that ECT had an entitlement to a buy-out order as at 20 October 2020.  See §§39-44 above.

(4)  Krishna Holdco is distinguishable.  In that case, the claim for quasi-interest was made on the basis of delays in the proceedings, and the court was not satisfied that the delays were the responsibility of the party ordered to buy out the shares (§§227-229, 233-237).  If and to the extent that the judge was saying that causation has to be shown before the court may award quasi-interest on the purchase price, I am unable to agree.  Such holding goes against the authorities where the court explained the principles underpinning an award of quasi-interest in the context of a buy-out order. 

46.As regards the period of interest, since an award of quasi-interest on the buy-out price is to compensate ECT for the inability to benefit from its membership during the Intervening Period, it would be fair and appropriate to order interest from 20 October 2020 up to the date when Cobo SPA pays the buy-out price to ECT. 

47.As for the rate of interest, Mr Ho submits that the appropriate pre-quantification rate is usually a commercial rate, i.e. 1% above prime lending rate per annum (Re Power Hong Kong Ltd [2023] 5 HKLRD 369 §§22-23; Re Sound Global §38; Re Golden Bright Ltd [2007] 1 HKC 89 §§42-43, 45; Re Goldsfine §26).  Mr Cheng does not take issue with the submission. 

48.Accordingly, I hold that Cobo SPA shall pay interest on the buy-out price at 1% over prevailing HSBC prime lending rate for the Intervening Period. 

Directions on valuation

49.There is a large measure of agreement between the parties.  Although in correspondence ECT did not agree with a direction that the parties be at liberty to cross-examine the valuer on the report, at the hearing, Mr Ho agrees that it is appropriate for this Court to give the usual directions on valuation including liberty to the parties to cross-examine the valuer on the valuation report. 

50.I give the following directions on valuation:

(1)  The fair market value of ECT’s 40% shareholding in the Company be assessed as at 20 October 2020 on the basis that the Company is a going concern and without any minority discount (“Valuation”).

(2)  ECT and Cobo SPA shall attempt to agree on the valuer as a court-appointed expert (“Valuer”) within 7 days of this Judgment.

(3)  Absent agreement between the parties, each of ECT and Cobo SPA may submit up to 2 candidates together with their CVs and proposed charge-out rates to the court within 14 days thereafter, and the Court will make the appointment on paper. 

(4)  ECT and Cobo SPA shall agree on the contents of the written instructions to be provided to the Valuer within 21 days from the date of this Judgment, failing which such parts which are not agreed between the parties shall be determined by the Court on paper.

(5)  Each of ECT and Cobo SPA shall within 28 days from the appointment of the Valuer, procure and provide the Valuer with copies of all books, accounts and documents of and relating to the Company and its subsidiary, Cobo GZ (“Subsidiary”), their dealings, affairs and properties relevant to the Valuation insofar as such documents are in their possession, custody or power.

(6)  The Valuer shall within 84 days from the date of the appointment be entitled without restriction to seek whatever further documentation or information the Valuer considers necessary or appropriate for the Valuation, and the party to which the request is directed shall comply with the request within 7 days. 

(7)  ECT and Cobo SPA are entitled to inspect and take copies of the books, accounts and documents provided to the Valuer in accordance with §(5) and (6) above.

(8)  ECT and Cobo SPA may make representations in writing to the Valuer (“Representations”) within 28 days from the date of compliance with §(5) above and serve a copy of the Representations on the other party at the same time.

(9)  ECT and Cobo SPA may respond in writing to the other party’s Representations made under §(8) above to the Valuer within 14 days of the service of the other side’s Representations, and serve a copy of the response on the other party at the same time.

(10)  The Valuer may at any time following the making of the Representations ask any party reasonable questions in relation to the Representations, and the party (as the case may be) shall respond thereto within 14 days. 

(11)  All Representations and communications with the Valuer shall be in writing and sent by email and simultaneously copied (by email) to the other party’s solicitors, and any questions or responses from the Valuer to any party shall be in writing and sent by email and simultaneously copied (by email) to the other party’s solicitors.

(12)  Save as provided above, no further Representations shall be made by any party to the Valuer.

(13)  The Valuer shall have liberty to seek directions from the Court if, in his professional opinion, this is required in order to make a determination as to the Valuation of the Company.

(14)  The Valuer shall, within 112 days from the date of the appointment, make a determination as to the Valuation of the Company in the form of a written report (“Report”), having regard to any Representations made by the parties, simultaneously copied to the parties in electronic form, and the Report shall set out the assumptions and methodology relied upon in arriving at the Valuation.

(15)  The parties be at liberty to cross-examine the Valuer on the Report at trial on valuation, provided that a notice identifying the matters or issues on which a party wishes to cross-examine the Valuer is served on the other party and the Valuer no less than 21 days after receiving the Report.

(16)  The fees to be paid to the Valuer for preparing the Report (including any deposit payable to the Valuer) shall be borne in equal shares by ECT and Cobo SPA (i.e. 50% each) in the first instance. 

(17)  The parties and the Valuer shall have liberty to apply in respect of compliance with the directions above. 

51.I order that Cobo SPA shall pay interest on the buy-out price from 20 October 2020 up to the court’s determination on the buy-out price at 1% over prevailing HSBC prime lending rate and thereafter, at judgment rate until payment. 

52.The costs of the directions hearing be reserved and will be dealt with at the trial on valuation.

Mr Martin Ho and Mr John Cheung, instructed by Anthony Siu & Co., for the Petitioner

Mr Henry Cheng and Ms Emily Ting, instructed by Lewis Silkin, for the 2^nd Respondent