Tip-top Industries Ltd and Another v. David Tsoi and Another

HCA001540/1970

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

ACTION NO. 1540 OF 1970

-----------------

-----------------

Coram: Briggs, J.

Date of Judgment: 12 October 1970

-----------------

JUDGMENT

-----------------

1. At about 9 p.m. in the evening of Sunday September 20th Counsel and Solicitor for the Plaintiff came to my house and asked for an interim injunction. At that time no writ had been issued, but I was informed that it was intended to bring an action against the defendants and I was shown a draft of the specially endorsed writ and a draft of an affidavit which was to be sworn and filed by a Mr. Robbins, described as the chairman of the board of Directors of the Second Plaintiff Company and Joint Managing Director of the First Plaintiff Company.

2. The sole relief sought in the intended action was an order restraining the two defendants from entering the premises of the first plaintiff and restraining them from holding themselves out as directors or employees of the first plaintiff. The application was of course ex parte. The intended affidavit stated that the two defendants had been directors of the Tip Top Industries Co. Ltd., the first plaintiff, but that they had been validly removed from that office; that they had wrongfully entered the Company's premises and were seeking to remove documents from those premises. It was also said that the matter had been referred to the police. I was told by Counsel that there was considerable urgency because the parties were to meet the following morning at 8.30.

3. I accordingly granted an interim injunction until 9.30 a.m. on Friday 25th September on the usual undertaking as to damages and on Counsel's undertaking to issue the writ in the action forthwith.

4. The writ was not in fact issued until the 22nd of September. And it was on this date that the affidavit above referred to was sworn and filed. The statement of claim endorsed on the writ contains no claim other than the injunction to which I have briefly referred above.

5. The parties came before me on September 25th both being represented by Counsel. The matter was adjourned for the filing of affidavits and for argument until October 1st. There were further hearings on October 2nd and 6th.

6. As a result of further affidavit evidence the facts as set out in the unsworn affidavit of Mr. Robbins on September 20th have been implemented and the history of the relationship of the parties has been given in greater detail. This gives a very different impression of the conduct of the parties from what appeared in the original draft affidavit of Mr. Robbins.

7. The defendants were directors and employees of the Tip Top Industries Co. Ltd, the first Plaintiff Company. It is agreed that the first defendant was managing the factory of that Company. There is a conflict of evidence as to the exact position of the second defendant. But it is agreed that he was also a manager, an employee of the first Plaintiff Company. The two defendants were in charge of the whole production of the first Plaintiff Company, and were responsible for the employment of staff and the purchase of raw material.

8. Mr. Robbins is the chairman of the Board of Directors of the first Plaintiff Company. He is also Joint Managing Director of the second Plaintiff Company which is a majority shareholder in the first Plaintiff Company. The defendants are also shareholders in the first Plaintiff Company. They each hold 20% of the issued share capital while the second Plaintiff Company holds 60% of the issued share capital of the first Plaintiff Company.

9. On September 18th Mr. Robbins showed the two defendants a letter concerning the grant of a loan to enable the first Plaintiff Company to purchase certain premises for its own use. He suggested that there should be a meeting of directors to discuss this matter at noon on the following day September 19th, a Saturday.

10. In his second affidavit, sworn on September 29th in answer to a joint affirmation filed by the defendants, Mr. Robbins states that this was a ruse to enable him to have a directors' meeting "to enable a shareholders meeting to be called immediately for the purpose of removing the defendants as directors."

11. Mr. Robbins had apparantly deep suspicions of "the mismanagement and dishonest dealings and conduct on the part of the defendants" - these are his own words. He had made arrangements with Messrs. Securicor for them to set up guards at the offices and factory premises of the first Plaintiff Company to prevent the two defendants from entering those premises so soon as they had been removed as directors of the Company. In making these arrangements he apparantly acted as the representative of the majority shareholder in the first Plaintiff Company and as one of its directors.

12. At the appointed time and place a directors meeting was held at which all the directors were present. There were five directors, Mr. Robbins, the two defendants and two others. Mr. Robbins was the chairman and after some business be proposed that the Company call a meeting of the shareholders immediately at the close by the directors meeting. As I have said the shares of the Company are all held by the two defendants and the second Plaintiff Company. Mr. Robbins represented that Company. So at this meeting all the shareholders of the first Plaintiff Company were present or were represented.

13. At the Directors' meeting Mr. Robbins and two others voted in favour of holding a shareholders meeting. The two defendants said nothing. They did not oppose this suggestion or vote against it. Mr. Robbins then closed the directors meeting and opened the shareholders meeting, Mr. Robbins assumed the chairmanship of this meeting and proposed that the two defendants be removed as directors. The defendants said nothing, Mr. Robbins voted in favour of his own proposal. There were no votes against it. Mr. Robbins was the proper representative of the second Plaintiff Company which hold 60% of the shares in the first Plaintiff Company. So he then declared that the proposal had been carried and that the defendants had ceased to be directors. Later purporting to act as chairman of the Board of Directors of the first Plaintiff Company Mr. Robbins told the defendants that they were dismissed from employment in the Company.

14. The defendants version of these matters is slightly different but it agrees with what is stated above substantially.

15. After the meeting the defendants contacted their solicitors and they all went to the factory premises of the first Plaintiff Company. They found that men from the Securicor Company were in charge. They managed to enter the premises and there was considerable argument. The police were consulted. So were Mr. Robbins and his solicitor. There was more argument apparantly at a Police Station and eventually it was agreed that nothing should be removed from the premises by either party and that the defendants would lock the premises with their own keys. that additional locks installed by Securicor should also be locked, the Securicor men to retain their keys. It was also agreed that this position should remain throughout the following day, Sunday September 20th until the time on Monday morning that the factory was to open to admit the workers. It was about midnight when this matter was finally arranged, it would appear that the argument had lasted from the late afternoon until then.

16. The account given in the last paragraph is taken from the Joint affirmation of the defendants which has not been contradicted.

17. As I have said above the facts as I now know then bear a very different aspect from those contained in Mr. Robbins draft affidavit which I was shown on September 20th and to which I shall now refer for convenience as 'the first affidavit'.

18. The defendants were undoubtedly tricked into attendance at the shareholders meeting of the Company: no mention was made of that in the first affidavit. No mention was made of the arrangements made by Mr. Robbins on behalf of the Company to employ the Securicor Company before the removal of the defendants. No mention was made that the two defendants were employees of the Company, nor that they had been dismissed from that employment. No mention was made that an agreement had been reached between the parties to leave the premises under double lock over the week end.

19. All these facts which were outlined must have been within the knowledge of Mr. Robbins. And they are in my view material facts. I am not blaming Counsel for their suppression or omission but I do not think that they can be excused on the ground of the necessity for haste.

20. An applicant for an ex parte injunction must show uberrima fides. All the material facts must be disclosed, nothing known omitted. And it is for the Court to determine what facts are material. The two leading cases are Schmitten v. Faulks 1893 NW 64 and R v. Kensington Income Tax Commissioners 1917 1KB 487. If the Court is of the opinion that material facts known to the applicant have not been disclosed the application for an interim injunction will be refused regardless of the merits of the case. And as I have said it is for the Court to decide what facts are or are not material.

21. The omissions referred to above are of such a nature as to give quite a different impression of the facts from what I now am told really occured. Whether it is likely that the Court would in effect endorse and support what may be called conduct which was high handed if not arrogant does not concern me in these proceedings; I wish to make it clear that I am not deciding the merits of this issue. It has been clearly shown to me that facts material to this application for an interim injunction were not disclosed to the Court and is on that ground that the injunction must be dissolved.

22. The injunction will be dissolved.

23. Costs to the defendants to be paid by the second Plaintiff Company.

24. Certificate for two Counsel.

Representation:

Mills-Owens (David Burgin & Co.) for both plaintiffs.

Litton, Q.C. & M. Asome (Peter Mo & Co.) for both defendants.

Oral decision of the 6th October, 1970 reduced in writing.