Case Document

100%Judiciary

HCMP004146E/2001

HCMP 4146/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 4146 OF 2001

____________

IN THE MATTER of CHIME CORPORATION LIMITED

AND

IN THE MATTER of the Companies Ordinance (Cap. 32) of the Laws of The Hong Kong Special Administrative Region

____________

BETWEEN
	TAN MAN KOU and CHEUNG YAT MING in their capacity as the Joint Administrators Pendente Lite of the Estate of WANG TEH HUEI(by Orders of the Court dated 15 March 2000 and 26 March 2001)	Petitioners

	AND

	CHIME CORPORATION LIMITED	1st Respondent
	NINA KUNG alias NINA T H WANG	2nd Respondent
	KUNG YAN SUM (formerly known as GONG XIAN XIN)	3rd Respondent
	FORUM EVER LIMITED	4th Respondent
	FOCUS PROFIT LIMITED	5th Respondent
	LIU YUAN CHUN	6th Respondent
	JOSEPH WING KONG LEUNG	7th Respondent
	CHAN KAM POR	8th Respondent
	KWOK KI LI	9th Respondent

____________

Coram: Hon Kwan J in Chambers

Date of Hearing: 9 February 2004

Date of Decision: 9 February 2004

_____________

D E C I S I O N

_____________

1.This is a summons issued by the Joint Administrators of the estate of Mr Wang Teh Huei, who are the petitioners herein, seeking an order to stay the striking out application of Mrs Nina Wang, the 2nd respondent herein, pending final determination of the Joint Administrators' appeal in CACV No. 124 of 2003. The Joint Administrators also seek an order that the hearing date of that strike out application, which is on 26 February 2004, be vacated.

2.The Joint Administrators seek a stay on two grounds. Firstly, it was contended by Ms Tham Yuet Ming, who appeared on behalf of the Joint Administrators, that there is overlap in the issues considered by the Court of Appeal and the issues to be considered on the strike out application. The hearing before the Court of Appeal was on 21 October 2003 and judgment was reserved. It would of course make sense to adjourn the strike out application if what is decided in the appeal may have a direct bearing on any issue to be decided in the strike out application. Secondly, it was submitted that the Joint Administrators are considering amendments to the petition to meet the attacks to be made in the strike out application and it would be sensible for the Joint Administrators to look to the Court of Appeal judgment for guidance as to the scope of the further amendments they should make. I would deal with the amendment point first. No amendment has been put forward by the Joint Administrators so far. I have no idea even as to the broad nature of any such proposed amendment. In the circumstances, I do not propose to take the possibility of further amendments into consideration at all.

3.It was disputed by Mr Winston Poon, SC, who appeared on behalf of Mrs Wang, that there is any overlap in the issues considered by the Court of Appeal and issues to be argued in the strike out application.

4.I go first to the issues and arguments that have been and are likely to be advanced by the parties in the pending strike out application. They are set out in the written submissions of the parties prepared for an earlier hearing on 5 September 2003 and elaborated in the oral submissions today.

5.In the strike out application, which was made by summons on 21 August 2003, Mrs Wang seeks to strike out from the Amended Petition paragraphs 26(ii), 34 to 40, 41 and the references to the "A" shares in Chime Corporation Ltd ("Chime") in paragraphs 43, 44 and 45. These allegations in the Amended Petition relate to the expropriation by Mrs Wang of 19, 998 A shares ("the Chime A shares"). The Amended Petition seeks no relief in respect of the Chime A shares. Reliefs are sought in respect of an improper allotment of 15 million Chime B shares to Mrs Wang.

6.Mrs Wang seeks to strike out the Chime A allegations on three grounds:

(1) The alleged expropriation of the Chime A shares and the dispute in the beneficial ownership of these shares are personal disputes between the Joint Administrators and Mrs Wang. They do not constitute conduct in the affairs of Chime and are not proper subject matters for a petition against Chime under section 168A of Cap. 32.

(2) The Chime A allegations do not operate on the interest of Mr Wang qua member of Chime and are wholly irrelevant to the unfairly prejudicial conduct in the affairs of Chime relied on to found relief in the Amended Petition, which relates to the improper allotment of Chime B shares.

(3) The dispute in the beneficial ownership of Chime A shares is the subject of separate proceedings brought by the Joint Administrators in HCA No. 2415 of 2002. It is an abuse of process and vexatious for the Joint Administrators to pursue both actions.

7.The Joint Administrators resist the strike out application. As I understand Ms Tham's submissions today, the Joint Administrators are not using the Chime A allegations to found a petition under section 168A. The Chime allegations are featured in the Amended Petition for a dual purpose: they are part and parcel of the complaint of the improper allotment of Chime B shares and they constitute relevant evidence. The argument runs as follows:

(1) A significant part of the Joint Administrators' case in the Amended Petition is that Mrs Wang has "engaged in a course of conduct and/or act or acts designed to expropriate Mr Wang's majority shareholding in Chime in her favour" (see paragraph 26 of the Amended Petition).

(2) The "course of conduct" includes Mrs Wang's conduct in relation to the Chime A shares. Whether there was expropriation of Mr Wang's majority shareholding, which was made up of the A and B shares, would require consideration of the Chime A allegations. The trial judge should not look at the Chime B allotment in a vacuum, as the Chime A allegations are relevant facts that need to be considered to put the Chime B allotment into its fair and proper perspective. Thus, although reliefs are sought only in respect of the Chime B shares, the Chime A allegations are an integral part of the Amended Petition.

(3) Mrs Wang has asserted in her Points of Defence there were proper reasons for the allotment of the 15 million Chime B shares. The Joint Administrators wish to put in evidence to show that the allotment was motivated by an improper and ulterior purpose, which was to usurp Mr Wang's majority shareholding, and the Chime A allegations constitute such evidence.

8.I turn to the arguments raised in the Court of Appeal and the reasons why the Joint Administrators say there is an overlap of issues. I have read the written submissions to the Court of Appeal and the transcript of the hearing.

9.The judgment on appeal was a decision to disallow amendments made to the petition in respect of loans made by Chime to Chinachem Agencies Ltd ("CAL") as an allegation of unfairly prejudicial act, and reliefs sought in respect of such loans for an account to be taken and repayment of the sums owing. The main issue on appeal is whether as a matter of jurisdiction such claims can be included in a petition under section 168A or whether the Joint Administrators should proceed by separate proceedings in a derivative action. This main issue has no bearing to the arguments likely to be raised in the forthcoming strike out application.

10.In the course of the arguments made on appeal, there were certain exchanges between the Chief Judge and Mr Potts, QC, who appeared for Mrs Wang. These exchanges are at pages 28 to 30 of the transcript. It was contended by the Joint Administrators that in those exchanges, Mr Potts would appear to have made a concession to the effect that the Joint Administrators can complain about the improper loans to CAL in the petition, as evidence of the oppressive conduct complained of, provided it is regarded as sufficiently relevant, and as long as they do not seek relief in the petition in the form of monetary compensation for the loans. See also the exchanges between the Chief Judge and counsel for the Joint Administrators, Mr Hildyard, QC, at page 38 of the transcript, where Mr Hildyard referred to the point of jurisdiction, namely whether the court is precluded from making restitution or compensation for these loans in a section 168A petition, as the "punch line". As mentioned earlier, the strike out application in respect of the Chime A allegations would not be concerned with any such jurisdictional issue.

11.The Joint Administrators contended that the Chime A allegations should also be regarded in a similar light as the proposed amendment in the body of the petition concerning the loans to CAL, disregarding for present purpose the reliefs sought for the CAL loans in the prayer. Thus, the Chime A allegations would also constitute evidence of the "course of conduct" designed to expropriate Mr Wang's majority shareholding. Even if the submissions of Mr Potts do not amount to a concession, Ms Tham submitted that it is possible that the Court of Appeal may set out principles and give guidance on the question of what can or cannot be included in a petition under section 168A.

12.I should not speculate on what the Court of Appeal judgment may or may not contain. One of the issues to be argued in the forthcoming strike out application is the question of relevance of the Chime A allegations to the unfairly prejudicial conduct in respect of the allotment of the Chime B shares. Whatever views the Court of Appeal may come to on any question of relevance of the CAL loans to the allegation of unfairly prejudicial conduct in the petition, it has no direct bearing to the aforesaid issue that is to be raised in the strike out application.

13.I am not persuaded that the judgment of the Court of Appeal is likely to have direct impact on the issues to be argued on the strike out application.

14.I therefore dismiss the Joint Administrators' application for a stay. I order costs of this application be to the 2nd respondent in any event. The Joint Administrators' own costs are to be taxed on a trustee basis and be paid out of the estate.