Read the full judgment text of HCCW 399/1999 on BabelCite. This High Court CFI judgment was delivered on 8 February 2000 before Le Pichon J.
Companies – Winding up – Discovery – Norwich Pharmacal jurisdiction – Whether court has jurisdiction to grant discovery to parties to a winding-up petition to enable them to make informed decision whether to support or oppose the petition – Whether discretion should be exercised in favour of granting discovery – Just and equitable winding-up petition – Dilution of shareholding – Share allotment to defeat board removal resolution – Companies Ordinance, Cap.32. Winding-up petition presented by Miracle Chance Limited against Greater Beijing Region Expressways Limited on the just and equitable ground, complaining of dilution of Miracle Chance's shareholding from 100% to 42.24% and ultimately to zero through various transactions orchestrated by director David Yuk Wah Ho. On 5 November 1999, a resolution was passed by certain shareholders (collectively 62.2% of issued capital) to remove Mr Ho and his associates from the Board. In response, Mr Ho caused the Company to allot 1,072,791 shares to Bright Avenue Inc. (a company controlled by him), increasing his interest from 37.8% to 51.06% and frustrating the resolution. The allotment arose from the Bright Avenue transaction, involving the sale by Mr Ho of his interests in two toll road projects in Guangxi (held through Miu Yuan and Xin Lian) to a Company subsidiary, with deferred consideration and conversion options allowing Mr Ho to acquire further shares in the Company in lieu of payment. Held, jurisdiction to grant discovery: The court has jurisdiction under Norwich Pharmacal principles to grant discovery. A winding-up petition is a class remedy and any person with locus to be heard may apply for orders necessary to ensure proper determination of the class right (Re Esal (Commodities) Ltd). The Norwich Pharmacal principle extends beyond identification of wrongdoers to cases where information is necessary for justice to be done, including in aid of intended or contemplated proceedings (British Steel Corporation v. Granada Television Ltd; P v. T Ltd). The information must be such that justice requires disclosure and cannot be obtained from any other source (Lonrho Plc v. Fayed (No.2)). The Applicants and Always Win are parties to the petition as the deviations in their notices of intention to appear from Form 10 were not fatal. Held, exercise of discretion: The discretion should be exercised in favour of granting discovery. The court should not pre-empt the pending application to strike out the petition, and Alipour v. Ary indicates the court will consider all circumstances. The alleged lack of substance in the complaints was rejected at least for the purposes of the exercise of discretion, given concerns about the structure of the transaction, conversion rights and conflict of interest. The alleged material non-disclosure (confidential reports concerning Always Win and BeN Offshore's beneficial owners, the Sallmans valuation, and BVI law) would not have affected the exercise of the discretion, as the complaints were directed at the structure of the transaction rather than the adequacy of consideration. Outcome: Applications to discharge the November Order dismissed; order made in favour of Always Win on its summons for discovery and inspection with specified amendments; time for production of documents extended; liberty to apply.
Legal issues: Jurisdiction to grant discovery in winding-up proceedings · Exercise of discretion to grant discovery
Outcome: Applications to discharge the November Order dated 24 November 1999 dismissed; order made in favour of Always Win on its summons for discovery and inspection, subject to specified amendments to paragraphs 2, 3 and 4 of the summons.