Great Forest (China) Enterprises Ltd v. Pacific Drayage Co Ltd

HCA008733/1984

1984, No. 8733

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: Deputy Judge Barnett in Chambers

Date: 18 January 1985

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DECISION

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1. This application for an interlocutory injunction has given me considerable concern, not least because the effect of granting the injunction will effectively be to resolve the case.

2. The case arises out of business dealings between a Mr. Ho, the majority shareholder and director of the plaintiff, and Mr. Lai, majority shareholder of the Defendant. Because those dealings and the relationship between Mr. Ho and Mr. Lai have turned sour, the 2 companies have been drawn into the dispute.

3. Sometime in 1984 it was agreed that the Plaintiff should have use of premises at 1001 - 1004 Join-In Estate, where the Defendant also carried on business. At the time Mr. Lai was financing the Plaintiff.

4. The terms on which the Plaintiff occupied the premises are not clear. Mr. Ho talks about the Plaintiff and Defendant each paying part of the rent. Miss Wong, on behalf of the Plaintiff talks about a licence at no consideration. But what is clear is that the Plaintiff, by Ho and Wong, claim they were in effect dealing with the Defendant.

5. The agreement by which the Plaintiff occupied the premises was terminated at the end of October 1984. When an attempt was made by Wong to collect the Plaintiff's effects on 19th December, she found all but 2 typewriters locked in a room. Lai would not let her remove them.

6. The defendant professes no knowledge of the matter. Through its manager it says it does not have control over or access to the room where the effects are because it was occupied by a partnership firm, Special Sale Store, formed privately by Ho and Lai. Any dealings Lai may have had with Ho, the room or the effects were in a private capacity.

7. Effectively, the Defendant does not dispute ownership of the goods.

8. The Plaintiff maintains the corporate veil should be lifted. This will show Lai as majority shareholder and controlling force of the Defendant and thus the Defendant is fixed with knowledge of Lai's dealings. The Defendant cannot be allowed to say it has no knowledge and is not in a position to release the effects.

9. At the outset, as I indicated, I favoured this approach. But a careful analysis of the facts and law tells against this.

10. The corporate veil is Lifted to make an individual personally liable where, because of fraud or improper conduct, he should not be allowed to hide behind a company which is a mere sham.

11. Fraud is not pleaded here. Improper conduct amounts to something more than business men falling out. Therefore, lifting the veil does not appear justified in this case.

12. But in any event the proposition is, in my view, misconceived. The instant case is not one of an individual seeking to hide behind a corporate body but rather of a company disclaiming any knowledge of the private activities of an officer and its principal shareholder.

13. What ever may have been the relationship between the Plaintiff, Ho and Lai in respect of their various business ventures, the Plaintiff is clear on one thing. The occupation of the Join-In premises was an arrangement with the Defendant through Lai. That is the tenor of Ho and Wong's evidence. The usual rules in relation to the authority of a company's officers must apply. The Plaintiff is entitled to rely on Lai's authority to act on behalf of and bind the Defendant.

14. It would be futile to analyse the various affidavits. It is worth noting that Lai, whom I cannot conceive has no knowledge of these proceedings, has not seen fit to file an affidavit to claim either that occupation of the premises was his private affair or title to the effects. Suffice it to say that the material available does not fail to disclose that the Plaintiff has any real proepect of it succeeding in its claim for a permanent injunction at trial:

American Cyanamid test.

15. Therefore I have to consider whether damages would be adequate compensation for the Plaintiff if it succeeds at trial. The effects claimed contain the Plaintiff's business and company documents. Their detention must hinder the Plaintiff's business activities and cause it damage, damage which I apprehend would be difficult to quantify should it come to assessment. In my view damages would not be an adequate remedy.

16. The defendant, which as I have indicated is not in a position to dispute ownership of the goods, is unlikely to suffer any loss if the injunction is granted. On the contrary, because it is suggested that this action has prevented the Defendant from removing from its premises. Precisely why this is so is not in evidence. But the granting of the injunction will put an end to its difficulties.

17. In the circumstances I am of the view that the injunction should be granted as follows:

18. The Defendant whether by itself, its directors and in particular Lai Shu Chi, servants, agents, workmen or whomsoever forthwith do permit the return and delivery to the Plaintiff of the goods referred to in the Schedule to the indorsement of claim.

19. Also in terms of para. 3 of Plaintiff's summons.

20. However this subject to the usual undertaking as to damages to be given both by Plaintiff and by Mr. Ho Kong, Norman personally.

21. I am satisfied that such undertakings will be sufficient in the event that any order for damages is made against the Plaintiff in favour of the Defendant.

22. Order: Plaintiff to have costs of application.

Representation:

Mr. Clement Luk (Lau & Co.) for Plaintiff.

Mr. Luiz Pedruco (Kwan & Kwan) for Defendant.