Lo Kam Pang and Others v. Unlong Tung Yick Land Investment Co Ltd and Others
Read the full judgment text of HCA 4274/1980 on BabelCite. This High Court CFI judgment was delivered on 31 July 1980 before Hooper, Commissioner of the High Court.
Company law – shareholders – beneficial interest in company property – whether a shareholder has a beneficial interest in property owned by the company – principle that a company is the beneficial owner of its own property and shareholders have no legal or equitable interest therein – application of Order 18 rule 19(1)(b)(d) – striking out of frivolous, vexatious or abusive actions – whether action was bona fide – 21 plaintiffs claimed to be shareholders and beneficial tenants-in-common of land in Yuen Long – most had transferred shares, were not shareholders, or had given powers of attorney to the company – 1st plaintiff had consented to orders for possession and demolition of his stalls – default judgment and demolition against 2nd plaintiff – paragraphs 3 to 6 of indorsement challenged locus standi of Jabrin Limited and validity of EGM held on 24 July 1980 – previous proceedings rejected the locus standi challenge – lis pendens registered against company's property by memorial No. 236685 – vacation of lis pendens under section 19 of the Land Registration Ordinance (Cap. 128) and inherent jurisdiction – inherent jurisdiction to protect court from wrongful registration of lis pendens – reliance on Heywood v. B.D.C. Properties (No. 2), Thians Plastics Industrial Co. Ltd v. Tin's Chemical Industrial Co. Ltd, Taylor v. Taylor and Anstalt Nybro v. Hong Kong Resort Co. Ltd – counsel submitted solicitors Arthur Au & Co. should bear costs personally – court deferred question of costs to Registrar – action and indorsement of claim struck out – lis pendens vacated
Legal issues: Whether a shareholder has a beneficial interest in the property of the company · Whether to strike out the plaintiffs' action and indorsement of claim · Whether the lis pendens should be vacated
Outcome: Plaintiffs' action and indorsement of claim struck out in their entirety; lis pendens registered against the 1st defendant's property vacated forthwith
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HCA004274/1980 IN THE SUPREME COURT OF HONG KONG HIGH COURT ACTION NO. 4274 OF 1980 -----------------
----------------- Coram: Mr Commissioner Hooper Date of Judgment: 13th October 1980 ----------------- JUDGMENT ----------------- 1. This matter came before me on the application of the 1st and 2nd defendants under Order 18 rule 19(1)(b)(d) for an order that the plaintiffs' action and the indorsement of the claim should be struck out on the ground that inter alia the same was frivolous, vexatious or otherwise an abuse of the process of the court. 2. In paragraph 2 of the same summonses there was an application for an order that the lis pendens registered by the plaintiff against the property of the 1st defendant by memorial No. 236685 be vacated forthwith. 3. The writ of the plaintiffs bore the following indorsement of claim:
4. In this action there were therefore 21 plaintiffs and they were claiming in paragraph 1 that each and everyone of them had at all material times been and still was a shareholder of the 1st defendant and secondly that each and everyone of them had been at all material times a beneficial tenant-in-common of the property of the 1st defendant, namely, the Unlong Tung Yick Land Investment Company Limited (hereinafter called "The Company"). In paragraph 2 therefore it was admitted that the property was registered in the name of The Company. Paragraphs (3), (4), (5) and (6) dealt with the locus standi of Messrs Jabrin Limited to apply to the court under Section 114(2) of the Companies Ordinance (Cap. 32), and the validity of the general meeting called on the 24th July 1980 in pursuance of that order of the court. It was at that meeting that the authority of Messrs Yung Yu Yuen and Co., Solicitors, to represent The Company to obtain possession of the property of The Company was confirmed and ratified. 5. The locus standi of Messrs Jabrin Limited to make such an application for an order of the court was challenged in previous proceedings between the same parties in respect of a similar application by Jabrin Limited to apply for a meeting under S.114(2) Cap. 32. That challenge was rejected by me for the reasons set out in my judgment in that other matter. Suffice it to say that the same reasons applied in the present case and on the same grounds I struck out these 4 paragraphs from the plaintiffs' indorsement of claim. That left me with the first 2 paragraphs. 6. On the evidence before me it was quite clear that only three of the 21 plaintiffs had not disposed of any of their shares in The Company and were entitled to be registered as shareholders in the company. Those 3 were the 1st plaintiff Lo Kam Pang alias Lo Tsang, the 2nd plaintiff Lok Ying Tai and the 3rd plaintiff Tang Ming. All the other plaintiffs had transferred all their shares with the exception of -
1st plaintiff LO Kam-pang's claim to have beneficial interest in the property of The Company 7. This man who claimed in the present proceedings to be a beneficial tenant-in-common of the property of The Company had in fact on the 23rd February 1979 given a power of attorney to The Company to take vacant possession of the two stalls which had been allotted by The Company to him. That same man had allowed 2 licencees to occupy the same 2 stalls, That same man was joined as a defendant in the actions brought by the Company in respect of the two occupiers of the two stalls in question. In those two actions The Company took out summonses for orders for possession against the defendants in both actions and obtained orders for possession. The judgments were duly executed and the stalls were demolished. Those orders for possession were made by consent and this man had put his signature on both summonses consenting to the orders. 8. It is incredible that such a man should have come to this Court seeking the relief and registering a lis pendens against the property. Despite this he claimed in the affidavit filed in the present proceedings in para 4 "on a date unknown to me, the 1st defendant with-out my knowledge and consent demolished property known as Stall No. 5 of 6th Street and Stall No. 6 of 5th Street erected on the said piece of land since 1953 of which I am the beneficial tenant in common and have exclusive right of possession thereto, causing loss and damage to the deponent herein." 9. This was a patently untrue statement. 10. In para 7 of his affirmation filed in the present proceedings Mr. LO gave his reasons for claiming to be a beneficial tenant-in-common. He said :-
11. It would appear in that para that Mr. LO (for the 1st time in either these proceedings or the previous proceedings) was attempting to say that The Company did not in any event own the property in question, since the property had not been transferred to The Company but had been transferred to Messrs CHAN Wai-to and other directors of the company. 12. This was a complete non-sequetur because Mr. LO could have no claim to property owned by CHAN Wai-to and the other directors personally. In any event such a claim was contrary to the claim in the indorsement on the writ in para (2). The 2nd defendant LOK Ying-tai's claim to be a beneficial tenant-in-common of the property of The Company 13. Judgment was also obtained against this plaintiff in Fanling District Court Case No. 311 of 1979. That judgment was entered in default. The order had been executed and the stall demolished. The 3rd plaintiff TANG Ming's claim to be a beneficial tenant-in-common of the property of The Company 14. In fact it was TANG Tak-shing, claiming to be the son of the 3rd plaintiff, who was occupying stall No.9 in Street No.3 and asserting a claim. He filed an affirmation in HCMP No. 589/80 and affirming on the 11th September 1980 that he held a power of attorney from the 3rd plaintiff. What he did not disclose, however, was the fact that he consented to an order for possession in respect of the stall and signed receipts in respect of the compensation paid to him for delivering up vacant possession of his stall. The 21st plaintiff WAN Kwai-ying's claim to be a beneficial tenant-in-common of the land of The Company 15. This plaintiff had not only sold her own shares to Jabrin Limited, but had also given an authorisation under seal a copy of which was exhibited, for vacant possession of stalls No. 7 and 14 in Street 1 and 2 to be delivered up to The Company. She now purported to represent someone who was deceased, and yet in the power of attorney she authorised the company to get back possession of both stalls. Orders for possession had been duly obtained and both stalls had been demolished. The 20th plaintiff MAN Miu's claim to be a beneficial tenant-in-common of the property of The Company 16. In fact as was seen in the previous proceedings MAN Miu was not a shareholder in The Company at all. It was her son CHEUNG Bing-fook who was. Orders for the possession had been obtained against CHEUNG Bing-fook and also the occupier of the stall of CHEUNG Bing-fook. The 17th plaintiff NG Kwan's claim to be a beneficial tenant-in-common of the property of The Company 17. In fact NG Kwan had never been a shareholder in The Company. In the previous proceedings she had exhibited a copy of the Letters of Administration in relation to the estate of her dead husband but no shares in the company were disclosed therein. However in Fanling District Court Case No. 482 of 1979 judgment had been obtained for possession of the stall in question from one LAM Chai. The order for the possession had been duly executed and vacant possession recovered. 18. It is clear from the above that not one of the plaintiffs to this action had a legitimate or moral claim to the property of The Company. However Mr. CHANG who represented The Company in the present proceedings produced authority for the proposition that a Company is the beneficial owner of its own property : it does not hold it as a trustee for its members, and they have no interest therein. He referred also to a passage in Pennington's Company Law, 4th edition, at page 43 indicating that because a shareholder has no legal or equitable interest in The Company's property, he can not even insure it. See Macaura & Northern Assurance Co. Ltd (1925) A.C. 619 (see judgment of Buckmaster L.J. at page 626) 19. This was a clear and obvious case where there was no bona fide case for any of the plaintiffs to claim a beneficial interest in the property of The Company. I therefore ordered that the whole of the plaintiffs' action and indorsement on the writ be struck out. Application by Jabrin Limited and The Company under Section 19 of the Land Registration Ordinance Cap. 128 and under the inherent jurisdiction of the Court 20. Mr. CHANG for The Company referred to the following cases
21. There is no need for me to go into these various authorities. This was a clear case of a wrongful registration of a lis pendens and I had no hesitation in ordering that the lis pendens should be vacated forthwith. At the close of the proceedings Mr. Miller submitted that the costs of the proceedings should be borne by Mr. Arthur Au & Co. personally. I however ordered that the matter should be dealt with on a date to be fixed by the Registrar, which should be fixed on the same date as that which had been or was to be fixed for a decision on a similar question in the previous proceedings. 22. Mr. Miller's submission was on the basis that this was not a bona fide case and never had been. It was yet another attempt by Arthur Au and his clients to throw a spanner in the works, and to delay Jabrin Limited from reaping the fruits of the contract which it had entered into with The Company. He referred in great detail to the individual cases of the plaintiffs. I found that this was not a bona fide case but felt that this solicitor's firm should be given the opportunity of studying the judgment and addressing me on the matter before any order should be made that they should indemnify their clients in respect of the costs.
Representation: Mr. Miller, Q.C. & Mr. Peter Cheung instructed by Messrs. S.H. Leung & Co. for 2nd Applicant. Mr. Denis Chang instructed by Yung Yu & Yuen for 1st & 3rd Applicants. Mr. Arthur Au of Messrs. Arthur Au & Co. for the Respondent. HIGH COURT ACTION NO. 4274 OF 1980 (ERRATA)
Representation: Mr. Miller, Q.C. & Mr. Peter Cheung instructed by Messrs. S.H. Leung & Co. for 2nd Applicant. Mr. Denis Chang instructed by Yung Yu & Yuen for 1st & 3rd Applicants. Mr. Arthur Au of Messrs. Arthur Au & Co. for the Respondent. |