Case Document

100%Judiciary

HCMP004146G/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 Section 168A 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: 26 February 2004

Date of Handing Down of Decision: 17 June 2004

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D E C I S I O N

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The applications

1.I have before me two applications. The application taken out prior in time is a summons dated 21 August 2003 by the 2nd respondent herein, Mrs. Nina Wang ("Mrs. Wang"), seeking to strike out various parts in the Amended Petition concerning allegations in respect of 19,998 "A" shares ("the Chime A Shares") in the 1st respondent herein, Chime Corporation Limited ("Chime"). At the hearing, leave was given to amend the strike out summons to include in the application two further paragraphs in the Amended Petition relating to the Chime A Shares. The amended strike out summons was filed on 28 February 2004.

2.The other application is a summons dated 17 February 2004 by the petitioners herein, the joint administrators pendente lite ("the joint administrators") of the estate of Wang Teh Huei ("Mr. Wang"), seeking leave to amend the Amended Petition.

3.On 20 February 2004, prior to the hearing of both applications, the Court of Appeal in CACV No. 124 of 2003 handed down its judgment in an appeal from my decision on 6 May 2003, in which I had disallowed the amendments sought by the joint administrators to raise in the Petition an allegation in respect of loans made by Chime to Chinachem Agencies Limited ("CAL"). The appeal was allowed and that part of my order made on 6 May 2003 was set aside. The joint administrators have re-filed an Amended Petition on 3 March 2004 to include the amendments that have been allowed on appeal.

4.In the draft Re-amended Petition annexed to the amendment summons that I am concerned with, the amendments now sought by the joint administrators are shown in violet and the earlier amendments sought by them and allowed by the Court of Appeal are shown in green. This was done merely for ease of indication. Any amendments to the Amended Petition that I will allow in the present application would of course be shown in green when the Re-amended Petition is to be filed.

5.On 20 February 2004, following the handing down of the judgment by the Court of Appeal, I directed the amendment summons to be listed for hearing at the same time as the strike out summons on 26 February 2004 and be heard prior to the latter.

6.The amendments sought by the joint administrators and are opposed may be grouped under five broad areas:

(1) the Chime A Shares;

(2) the payment of dividends;

(3) the payment of emoluments;

(4) the loans to CAL; and

(5) the relief.

7.I will consider the opposed amendments in the order set out above. It would be appreciated that some of the objections raised on behalf of Mrs. Wang to the amendments concerning the Chime A Shares are the grounds relied on in her strike out summons.

8.I should also mention that there are amendments sought by the joint administrators that are not opposed and they relate to background or other non-controversial matters and the allegations concerning 15,000,000 "B" shares in Chime ("the Chime B Shares"). I therefore allow the amendments in the following paragraphs in the draft Re-amended Petition: paragraphs 10, 11.1, 15, 31, 32, 43A, 45.1, and 48.

The Chime A Shares

9.For the background matters alleged by the joint administrators that set the context and established the relevance of the existing and additional allegations concerning the Chime A Shares, I refer to the Court of Appeal judgment, paragraphs 2(1) to (6) and do not propose to set them out. As submitted by Mr. Ho, SC, who appeared for the joint administrators, the gravamen of the unfairly prejudicial conduct complained of lies in Mrs. Wang's course of conduct in wrongfully diluting Mr. Wang's shareholding in Chime. It was this course of conduct that enabled her to wrongfully seize control of Chime and then to abuse her control of Chime and its subsidiaries; such control in turn enabled her wrongfully to obtain collateral benefits and advance her own interest to the detriment of Mr. Wang's estate (paragraph 26 of the draft Re-amended Petition).

10.In summary, the allegations in respect of the Chime A Shares are two-fold: Mrs. Wang wrongfully exercised the rights attached to the Chime A Shares, which in truth belonged to Mr. Wang, in total disregard of the beneficial interest of Mr. Wang in these shares; and she wrongfully claimed beneficial ownership of the Chime A Shares, thereby in effect expropriating from Mr. Wang's estate the rights and benefits of these shares (paragraph 26A(ii) of the draft Re-amended Petition).

11.It is necessary to set out the details in respect of the allegation that Mrs. Wang had wrongfully exercised the rights attached to the Chime A Shares to deal with the submissions made. The gist of the allegations is as follows:

(1) At an extraordinary general meeting of Chime on 19 June 1990, two ordinary resolutions were passed: (i) the authorised share capital was increased by the creation of an additional 29,970,000 "B" shares of HK$1.00 each; and (ii) the directors were authorised to issue and allot for cash the said additional "B" shares and the 30,000 "A" shares of HK$100.00 each that had been comprised in the authorised share capital but had remained unissued.

(2) At a further extraordinary general meeting of Chime held on 22 August 1990, the resolution in (ii) above passed on 19 June 1990 was revoked and a new ordinary resolution was passed authorising the directors to issue and allot 15,000,000 "B" shares at a price of HK$100.00 each. These were the Chime B Shares allotted to Mrs. Wang in August and September 1990.

(3) The creation and allotment of the Chime B Shares was facilitated and compounded by Mrs. Wang's actions in relation to the Chime A Shares. Since the disappearance of Mr. Wang, Mrs. Wang has treated the Chime A Shares as her own and it was by doing so that she was able to procure the passing of the resolutions creating the Chime B Shares which enabled their allotment to herself and the consequent dilution of Mr. Wang's shareholding in Chime (paragraphs 34 and 39A of the draft Re-amended Petition).

(4) It was not in the interests of Mr. Wang for such resolutions to be proposed or passed, the purpose and effect of which were to dilute very substantially his shareholding in Chime. If the votes attached to the Chime A Shares had been exercised against the resolutions, the resolutions could not have been passed. Mrs. Wang caused such resolutions to be proposed and she procured them to be passed, unanimously in each instance, either by ensuring that no votes were cast in respect of such resolutions in right of the Chime A Shares or by casting such votes in favour thereof. In either case, she treated the Chime A Shares as her own to enable the resolutions to be passed in furtherance of her objective of securing total control of Chime and its subsidiaries (paragraph 39B of the draft Re-amended Petition).

(5) Mrs. Wang's conduct in proposing and using the voting rights attached to the Chime A Shares to pass the resolutions creating and authorising the allotment of the Chime B Shares and her conduct in procuring Chime to pay dividends on the Chime A Shares only for so long as she remained registered in respect of them are material facts in this petition, as this is an integral part of the course of conduct in wrongfully diluting Mr. Wang's shareholding and a further demonstration of her purpose and motive to advance her own interest to the detriment of Mr. Wang's estate (paragraph 40A of the draft Re-amended Petition).

12.The joint administrators' case for raising the existing and additional allegations in respect of the Chime A Shares (paragraphs 34 to 40A of the draft Re-amended Petition) is that these allegations are properly included in the Petition,

(1) as necessary factual averments leading to the wrongful creation and allotment of the Chime B Shares to Mrs. Wang; and

(2) as in themselves constituting or evidencing a course of conduct on the part of Mrs. Wang which resulted in the improper dilution of Mr. Wang's shareholding in Chime and Mrs. Wang seizing control of Chime for the furtherance of her own purpose.

13.In opposing the amendments to introduce additional allegations regarding the Chime A Shares and in seeking to strike out the existing allegations concerning these shares, Mr. Poon, SC advanced three broad grounds and other miscellaneous objections. The three broad grounds of opposition are as follows:

(1) The dispute in the beneficial ownership of the Chime A Shares is a personal dispute between the joint administrators and Mrs. Wang and is not conduct in the affairs of Chime per se. Accordingly, it is not a proper subject matter for a petition under section 168A of the Companies Ordinance, Cap. 32.

(2) The allegations relating to the beneficial ownership of the Chime A Shares are wholly irrelevant to the issue in the Petition, namely, the alleged improper allotment of the Chime B Shares, and were introduced into the Petition for no purpose save to prejudice the court.

(3) The dispute in the beneficial ownership of the Chime A Shares is the subject of a writ action brought by the joint administrators against Mrs. Wang and one Tai Ching Ping ("Mr. Tai") on 21 June 2002 in HCA No. 2415 of 2002. It is an abuse of process and vexatious for the joint administrators to pursue the same dispute in two proceedings.

14.I will deal with these grounds raised by Mr. Poon in the same order.

15.In respect of the first ground, Mr. Poon submitted as follows. An essential ingredient to a petition under section 168A is that the conduct complained of must consist of the conduct of the company's affairs. As stated by Harman J in Re a company (No. 001761 of 1986) [1987] BCLC 141 at 143g and 144e to g,

"It is of great importance to notice that, under s 459 [of the Companies Act 1985, the equivalent to our section 168A], as under s 210 [of the Companies Act 1948], it is still necessary to show that the affairs of the company, that is, the company in respect of which the petition itself is presented, which are being conducted; or that the act or omission is an act or omission of the company itself. ...

Thus one must always analyse very carefully, both under s 210 and under s 459, what is the conduct in the company itself or by the company itself (whether it be a single act or whether it be a course of conduct matters not) to see that there was conduct in the company's own affairs. ...

All these cases together, in my judgment, lead one clearly to the understanding that the conduct to be complained of must be in the affairs of the very company in respect of which the petition is presented."

16.Further reliance was placed on another judgment of Harman J in Re Unisoft Group Ltd. (No. 3) [1994] 1 BCLC 609 at 610j to 611h and 622i to 623f:

"Thus voting at a general meeting, whether annual or extraordinary, may result in a resolution being passed or defeated. The resolution is, obviously, an act of the company notwithstanding that the votes which pass or defeat it are the votes of members which are their private rights which ... can be exercised by members as they choose. The acts of the members themselves are not acts of the company nor are they part of the conduct of the affairs of the company and cannot found a petition under s 459. ...

It is important to remember that shareholders' rights to deal with or vote their shares are separate from the rights of the company as a corporate entity and shareholders' relationships with it. Shareholders are entitled to sell their shares, to vote their shares, to take any course they like in general meeting without regard to any other person's rights or position. In my judgment the law is that a shareholder may act with malice in voting his shares against a particular resolution and there can be no objection to that ... Of course, if a trustee holds shares on trust, he may have obligations to his beneficiaries which cause him to exercise the rights attached to those shares in the interest of the beneficiaries, but that is nothing whatever to do with an individual's position as a shareholder and his relationship with his co-shareholders.

In my judgment, it is vitally important to hold that shareholders' disputes concerning dealings with their shares are not the same as unfair conduct of the company's business. Shareholders must be kept distinct from the company so far as their private position as shareholders is concerned.

It is of course obvious that a company may act or conduct itself in a manner affecting a shareholder's rights in respect of his shares, for example the board may refuse to sanction a transfer of shares for improper reasons. The action of the board is conduct of the affairs of the company and so, if damage is alleged, may raise the ground of 'unfair' prejudice, and a petition under s 459 may be presented to the court. Further, a shareholder by exercising his own private right to vote his shares may cause the company to act, by the passing of some resolution in general meeting, in a matter alleged to be unfairly prejudicial to some members. Again it is not the act of the shareholder in voting that will found a petition but the result of that act if it produces action, or inaction, by the company. In my judgment the vital distinction between acts or conduct of the company and the acts or conduct of the shareholder in his private capacity must be kept clear. The first type of act will found a petition under s 459; the second type of act will not.

It is only when a shareholder is affected qua member of the company by the company's action which causes damage that s 459 comes into operation. There is a clear and important distinction, in my judgment, to be drawn between actions by shareholders affecting other shareholders directly and actions by the company affecting shareholders."

17.Mr. Poon also referred to my decision in Re Ka Ka Realty Ltd., HCMP No. 4751 of 2002, 3 September 2003, in which I quoted extensively from the two judgments of Harman J in paragraphs 14 to 20 and summarised the approach in paragraph 24.

18.Mr. Poon submitted that the rights of Mrs. Wang to deal with or vote the Chime A Shares registered in her name at the time are private rights separate and distinct from the rights of Chime, how she exercised the rights attached to these shares is not conduct of the affairs of Chime. Further, the alleged misappropriation or the exercise of the voting right in respect of the Chime A Shares could not have affected the interest of Mr. Wang qua member.

19.It does not seem to me that the first ground of opposition is valid. The allegations concerning the Chime A Shares have expanded in scope when the draft Re-amended Petition came to be considered by the court, as compared to the time when the strike out summons was issued. We are not just looking at the dispute in the beneficial ownership of the Chime A Shares, but also how Mrs. Wang had exercised the rights attached to these shares, which would appear to be against the interest of the alleged beneficial owner Mr. Wang. By exercising the rights attached to the Chime A Shares, Mrs. Wang had caused Chime to act. The resolutions passed at the general meetings in June 1990 and August 1990 to create, issue and allot new "B" shares, causing Mr. Wang's shareholding to be substantially diluted, are conduct in the affairs of Chime. Mrs. Wang had either voted the Chime A Shares in favour of these resolutions or she had taken the course of not casting votes in right of the Chime A Shares, when she as the trustee should have voted the Chime A Shares against the resolutions, as it was not in the interest of Mr. Wang for such resolutions to be passed. The payment of dividends on the Chime A Shares when she remained registered in respect of these shares is also conduct in the affairs of Chime. These actions of Chime and the board of Chime had affected the interest of Mr. Wang qua member and will found a petition under section 168A. As for the dispute in the beneficial ownership of the Chime A Shares and the breach of trust committed by Mrs. Wang, these are the subject matters of separate proceedings in HCA No. 2415 of 2002, which was founded on a different juridical basis.

20.I turn to the second broad ground of opposition. Here, Mr. Poon submitted that the Petition should contain only statements of the material facts or facts which are relevant to the issues in dispute, see Order 18 rule 7(1) of the Rules of the High Court. In determining the relevance or materiality of the matters pleaded, one has to see "whether the matter alleged ... would be admissible in evidence to show the truth of any allegation in the [pleading] that is material with reference to the relief that is prayed" (Christie v. Christie (1873) LR 8 Ch App 499 at 503). In the Petition, no relief is claimed in respect of the Chime A Shares. It is therefore not open to the joint administrators to argue that the allegations concerning the Chime A Shares are relevant or material to the issues in the Petition.

21.In answer to this, Mr. Ho submitted that the court should not take an unduly restrictive view of looking at the relevance of the Chime A Shares to the issue or the main complaint in the Petition, which is the unfairly prejudicial conduct of Mrs. Wang in wrongfully diluting Mr. Wang's shareholding thereby enabling her to seize control of Chime. The unfairly prejudicial conduct was made up of a course of conduct and the allegations concerning the Chime A Shares formed part and parcel of this conduct. It is necessary to have regard to the broad picture. Contrary to Mr. Poon's contention, the allegation concerning the allotment of the Chime B Shares is not the only issue in the Petition. Mr. Ho referred to the following passages in the judgment of the Chief Judge in CACV No. 124 of 2003, although made in the context of the loans to CAL, to dispel any misconception that the issue in the Petition should be viewed so narrowly:

"27. Returning to the facts pleaded in relation to the CAL loan, it is readily apparent that the Petitioners' allegations support the main complaint that after Mr. Wang's disappearance in April 1990, Mrs. Wang simply took over Chime and, together with the directors of that company, has operated it for her own benefit. In the original Petition, the only pleaded instance of this was the benefit Mrs. Wang received from dividends. The amendments relating to the CAL loan provide another instance wherein it is alleged Mrs. Wang has benefited herself after taking over the company. ...

29. In my judgment, it is important to place in context the Petitioners' complaints about the CAL loan, which is relied on as a part of the Petitioners' general complaint that Mrs. Wang took over Chime completely after her husband's disappearance, and thereafter has used the company as a vehicle for her personal benefit. This was more than just harming the company per se; these alleged acts were done in complete disregard of Mr. Wang's erstwhile interests in the company. ...

30. It strikes me as essential to view the Petition as a whole in order to see how each component fits into the general picture. ... Given that the essence of the allegation against Mrs. Wang is that she has taken over the company and, in the position of the controlling shareholder, has used it for her benefit, she and her co-directors are now asked to terminate and to redress the prejudice that hitherto has been caused to Mr. Wang's interests. ...

36. ... The gist of the Petitioners' complaint in the Petition is the unfair prejudice caused to Mr. Wang by Mrs. Wang having taken over Chime and having used it for her own purposes. ..."

22.Thus, Mr. Ho submitted that the issue in the Petition is not only the individual component or components of the conduct complained of, but the much broader allegation of Mrs. Wang taking control of Chime by illegitimate means, and abusing such control for her own purposes resulting in unfair prejudice to Mr. Wang's estate. I agree with Mr. Ho. The allegations concerning the Chime A Shares are relevant to the general complaint as an integral part of the course of conduct complained of and are properly included in the Petition. As for the objection that the allegations are immaterial and irrelevant as no relief is claimed in respect of the Chime A Shares, I would also accept Mr. Ho's submission here. Although no relief is claimed directly in respect of the Chime A Shares, with a view to bringing an end to the matters complained of, relief is sought in the draft Re-amended Petition to ensure some control over the activities of Mrs. Wang and the directors who have acquiesced and participated in the course of conduct impugned (paragraph 49 of the draft Re-amended Petition), and specific relief is prayed for the amendment of the Articles of Association, the appointment and removal of the board of directors, the remuneration of directors, and other necessary directions in relation to the management of Chime (paragraphs (3A), (3B), (3.5A) to (3.5E) of the prayer for relief in the draft Re-amended Petition).

23.The third broad ground of opposition is founded on abuse of process. Mr. Poon submitted that as the joint administrators have brought two proceedings in respect of the same cause of action, they should be put to election as to which action they would continue and the other action should be stayed.

24.About one year after the Petition was presented, the joint administrators commenced HCA No. 2415 of 2002 against Mrs. Wang and Mr. Tai, alleging that Mrs. Wang had misappropriated the Chime A Shares and claiming various relief in relation to the Chime A Shares, including a declaration that the legal and beneficial title to these shares was with Mr. Wang and damages for the dividends paid by Chime in respect of these shares. The High Court Action was stayed by an order made on 25 February 2003 but the stay was lifted by the Court of Appeal on 3 June 2003, as a result of which defences were filed by Mrs. Wang and Mr. Tai on 8 July 2003 and pleadings in the action were closed on 18 July 2003. Discovery in the action has been completed. As the joint administrators have been able to pursue the High Court Action since 3 June 2003, Mr. Poon argued that it must be an abuse of process for the joint administrators to continue to pursue the allegations relating to the Chime A Shares in the Petition.

25.This broad ground of opposition is not of substance. As submitted by Mr. Ho, this stems from a failure to understand the different nature of the two sets of proceedings although they involve an overlap of the facts. The High Court Action is a claim in right of Mr. Wang's beneficial ownership in the Chime A Shares, based on the alleged unlawful infringement of Mr. Wang's ownership rights by reason of a breach of trust committed by Mrs. Wang. This is to be distinguished from the Petition, which is brought under section 168A, and premised on unfairly prejudicial conduct in the affairs of Chime. The unlawful infringement of Mr. Wang's ownership rights by his trustee is not an ingredient for a section 168A petition. See the dictum of Hoffmann LJ in Re Saul D Harrison & Sons plc [1995] 1 BCLC 14 at 19a: "Not only may conduct be technically unlawful without being unfair: it can also be unfair without being unlawful." As stated by the Chief Judge in paragraph 36 of his judgment (this was said in the context of the CAL loan and the interplay between a section 168A petition and a derivative action): "the Petitioners rely on the Respondents' unlawful conduct as evidence of the manner in which they (and in particular Mrs. Wang) had conducted the company's affairs for her own benefit and in disregard of Mr. Wang's interests as a shareholder".

26.Mr. Poon has raised other miscellaneous objections to the amendments in respect of the Chime A Shares.

27.Firstly, he submitted that insofar as the allegations are premised on the assumption that Mr. Wang was the registered holder of the Chime A Shares, they are obviously unsustainable as Mr. Wang's name had never been entered in the register of members of Chime in respect of the Chime A Shares.

28.Insofar as there is dispute if Mr. Wang was at any time the registered holder of the Chime A Shares, it does not seem to me that this can be resolved simply on the basis of the register of members of Chime produced by Chime and Mrs. Wang. Mr. Ho has referred me to two documents. The first is the annual return of Chime to the Companies Registry for the year 1989 signed by Mr. Wang (this is pleaded in paragraph 35 of the draft Re-amended Petition); it was recorded that as at 30 December 1989, Mr. Wang was the holder of 22,000 "A" shares, which included the Chime A Shares. The second is a "Director's Certificate" dated 27 March 1990 given by Mr. Wang, in which he stated that as at the date of the certificate, he was the holder of 22,000 "A" shares in Chime. Further, in December 2003, the joint administrators have served separate notices of non-admission of documents on Chime and Mrs Wang, stating that they do not admit the authenticity of some of the documents disclosed by Chime and Mrs. Wang as specified, including the register of members of Chime. So this remains a live issue to be resolved at trial.

29.Secondly, Mr. Poon submitted that the allegations in paragraphs 39A and 39B of the draft Re-amended Petition as to how the votes in right of the Chime A Shares were cast are made without factual basis and are contradicted by the minutes of the extraordinary general meeting held on 19 June 1990, in that nothing in the minutes suggested that any votes were cast in right of the Chime A Shares. That may be one way of looking at the minutes, which had merely stated who were the members present and the resolutions proposed by Mrs. Wang who took the chair were passed unanimously. On the face of the minutes, Mrs. Wang had exercised the voting rights in respect of some or all of the shares held by her. Until proper discovery and/or interrogatories, the joint administrators cannot be specific as to whether she had voted the Chime A Shares in favour of the resolutions or that she had not cast any votes in right of these shares. I do not think this is a valid objection.

30.Thirdly, Mr. Poon contended that even if the votes attached to the Chime A Shares had been exercised against the resolutions, the resolutions for the creation and allotment of the new "B" shares would still have been passed on 19 June 1990, with the unanimous consent of the three shareholders who were present at that meeting, being Mrs. Wang, her brother and his wife (the 3rd and 6th respondents herein). The three possible scenarios in which the votes in right of the Chime A Shares might have been exercised were presented in table form as follows:

Scenario (1) - if the Chime A Shares were voted against the resolutions, the resolutions would be passed by a majority of 56.52% of votes in favour.

Present Number of "A" shares held Number of "B" shares held Percentage of votes at the meeting

For -

Mrs. Wang 2,000 12,000 30.44%

The 3rd respondent 3,000 3,000 13.04%

The 6th respondent 3,000 3,000 13.04%

56.52%

Against -

Mrs. Wang 19,998 ______ 43.48%

27,998 18,000 100.00%

Scenario (2) - if no votes were cast in right of the Chime A Shares, the resolutions would be passed by 100% of votes in favour.

Present Number of "A" shares held Number of "B" shares held Percentage of votes at the meeting

For -

Mrs. Wang 2,000 12,000 53.84%

The 3rd respondent 3,000 3,000 23.08%

The 6th respondent 3,000 3,000 23.08%

8,000 18,000 100%

Scenario (3) - if the Chime A Shares were voted in favour of the resolutions, the resolutions would be passed by 100% of votes in favour.

Present Number of "A" shares held Number of "B" shares held Percentage of votes at the meeting

For -

Mrs. Wang 21,998 12,000 73.92%

The 3rd respondent 3,000 3,000 13.04%

The 6th respondent 3,000 3,000 13.04%

27,998 18,000 100%

31.As I see it, the only objectionable part of the amendments is this sentence in paragraph 39B of the draft Re-amended Petition: "If the votes attached to his Chime A shares had been exercised against the resolutions they could not have been passed". This has been demonstrated to be incorrect. However, even if this allegation is removed, this does not detract from the complaint that Mrs. Wang had either not exercised the votes in right of the Chime A Shares or that she had voted these shares in favour of the resolutions, thereby causing the resolutions to be passed unanimously, as recorded in the minutes of the meeting on 19 June 1990 (I have not seen the minutes of the meeting on 22 August 1990). In either situation, she had exercised the rights attached to the Chime A Shares in a manner against the interest of Mr. Wang.

32.Fourthly, in respect of paragraph 40 of the draft Re-amended Petition, Mr. Poon submitted that the amendment to this paragraph should not be allowed as this raised a complaint that was after the Petition was presented on 31 July 2001. The conduct alleged there forms part of the complaint that Mrs. Wang wrongfully claimed beneficial ownership of the Chime A Shares. The initial allegation was that notwithstanding Mrs. Wang was ordered by the court on 12 June 2001 to transfer the Chime A Shares to the joint administrators, as at the date of the Petition, the directors of Chime, including Mrs. Wang, have failed to register the joint administrators as holders of these shares. The amendments sought to introduce an allegation that repeated requests were made to the directors of Chime to register the joint administrators as holders of these shares and the directors wrongfully refused or neglected to do so and an averment that the joint administrators were registered only on 12 September 2001. I do not find any difficulty with this amendment. This is not tantamount to raising a new complaint or allegation that had occurred only after the petition was presented.

33.I will allow all the amendments in respect of the Chime A Shares, with the exception of the objectionable sentence in paragraph 39B of the draft Re-amended Petition that I have mentioned earlier. I reject the grounds advanced for striking out those parts of the Petition relevant to the allegations concerning the Chime A Shares and the strike out summons is dismissed.

The payment of dividends

34.In summary, what is alleged in paragraphs 43 to 44A of the draft Re-amended Petition is that substantial dividends were paid by Chime in respect of the Chime B Shares and the Chime A Shares to Mrs. Wang, no account has been made to Chime and/or the estate of Mr. Wang of the benefits which have accrued to the Chime A Shares or the Chime B Shares, and no dividends have been proposed or declared in respect of the Chime A Shares since the joint administrators were registered as the holder.

35.Mr. Ho submitted that these allegations form part of the course of conduct of Mrs. Wang designed to benefit herself at the expense of Mr. Wang's estate. I am satisfied these allegations are material to the main complaint and are proper to be included in the Petition.

36.Mr. Poon objected to paragraph 44A of the draft Re-amended Petition as raising a matter that arose after the presentation of the Petition. It is stated here that since the registration of the estate as the holder of the Chime A Shares (which was after the Petition was presented), no dividends in respect of any Chime A Shares have been recommended, proposed, declared or paid. I will allow the amendment. The gravamen of the allegation is that Mrs.Wang had caused dividends to be declared and paid in respect of the Chime A Shares when she was the holder. The fact that no dividends have been declared in respect of these shares after she ceased to be the holder was brought in as contrast.

The payment of emoluments

37.The gist of the allegations in paragraphs 44B to 44K of the draft Re-amended Petition is that Mrs. Wang and the other directors of Chime, having control also of the subsidiaries, had caused five subsidiaries to pay very substantial directors' emoluments between the accounting periods ending in 1992 and 1998, which amounted to between 28.2% and 30.3% of the annual net profits of these five subsidiaries, purely in the self interests of Mrs. Wang and the other recipient directors, without any regard for the interests of Chime or its shareholders, without any general meeting of the subsidiaries concerned, and in breach of the Articles of Association in respect of four of the subsidiaries. It was averred that the fixing of directors' remuneration including bonuses of each of these subsidiaries, was a matter over which Chime had, or ought to have, exercised control.

38.On behalf of the 3rd, 6th to 9th respondents, Miss Chow submitted that the alleged wrongful payment of emoluments by the five subsidiaries is not conduct of the affairs of Chime and the amendments should not be allowed. I do not accept this. It is alleged in paragraph 44E of the draft Re-amended Petition that Mrs.Wang and other directors of Chime comprised the majority on the boards of each of the five subsidiaries and had the ability to control the affairs of the five subsidiaries. Here, the directors appointed by Chime to the boards of the subsidiaries had failed to take action to defend the interests of Chime in the fixing of directors' remuneration and bonuses of each of these subsidiaries. Such inaction of the board may be relevant conduct of the affairs of Chime (Re a company (No. 001761 of 1986), supra. at 144c to e, in which reference was made to the dicta of Lord Morton and Lord Denning in Scottish Co-operative Wholesale Society Ltd. v. Meyer [1959] AC 321 at 347 and 367). A firm view cannot be formed at this stage, as one would need to know more about how the subsidiaries were operated (Nicholas v. Soundcraft Electronics Ltd. [1993] BCLC 360 at 364i to 365b, 368a to g, 370i to 371a).

39.Miss Chow and Mr. Poon also objected to the amendments on the ground that they are lacking in particulars in these respects: which of the directors are alleged to have received emoluments; the amounts received by each individual; the dates of payment and receipt in each instance; which of the directors have acquiesced and participated in Mrs. Wang's wrongful and oppressive course of conduct; what are the acts or omissions relied upon as acquiescence and participation on their part; the date of each of these acts or omissions. I was referred to Perak Pioneer Ltd. v. Carrian Holdings Ltd., CACV No. 59 of 1985, 13 June 1985, in which Fuad JA stated at page 5 that "where an amendment is applied for it would be an unusual case where the Court would consider it appropriate to allow an amendment to be made which lacks particularity, and might cause embarrassment."

40.Only the aggregate figures paid by each of the subsidiaries in the periods in question as directors' emoluments were given in paragraph 44H of the draft Re-amended Petition. In paragraph 44I of the draft Re-amended Petition, the identities of the "other recipient directors" are not specified. My attention was drawn to paragraph (3.5C) in the prayer for relief which seeks an account to be taken of the directors' emoluments "received by or on behalf of each of [Mrs. Wang, the 3rd respondent, the 6th respondent] and the 7th to 9th respondents" from each of the five subsidiaries and that they be ordered to make repayments.

41.Subject to the best particulars the joint administrators can provide at this stage as to the identities of the "recipient directors" in respect of the directors' emoluments as stated in paragraph 44H of the draft Re-amended Petition for each of the subsidiaries, I will allow the amendments sought in paragraphs 44B to 44K. I think it is fair that the targets of attack should be made known to the respondents before they plead to this. As for the other particulars raised by Miss Chow and Mr. Poon, I do not think the non-provision of these particulars should have caused embarrassment to the respondents in this situation. The aggregate amounts paid as directors' emoluments have been stated for each of the subsidiaries, the separate amounts paid to each of the recipients could be left to the taking of the account as sought in the prayer for relief.

The loans to CAL

42.The initial amendments relating to the CAL loans are the amendments allowed by the Court of Appeal. The new amendments relate either to factual matters or inferences drawn therefrom. I see no reason to disallow the new amendments.

The relief

43.The initial amendments in the prayer for relief relating to the CAL loans are the amendments allowed by the Court of Appeal. The new amendments relating to the CAL loans in paragraphs (3.1), (3.2) and (3.3) introduce an alternative which will make it possible, subject to terms acceptable to the board of directors of Chime, to continue the loans to CAL. I will allow these new amendments.

44.The other amendments are relief sought with a view to bringing an end to the unfairly prejudicial conduct complained of, they include the amendment of the Articles of Association of Chime and of each of the subsidiaries, and an account of the excessive payments made for directors' emoluments with an order for repayment. Mr. Poon objected to the amendment in paragraph (3.5A), which relates to alteration in the Articles of Association of Chime with regard to directors' remuneration. He submitted that this should be disallowed as there is no complaint in the Petition of excessive remuneration paid by Chime to any of its directors, the complaint is only in respect of payments made by five subsidiaries of Chime to the directors of these subsidiaries. Mr. Ho submitted that as stated in paragraph 49 of the draft Re-amended Petition, the relief is sought with a view to bringing an end to the matters complained of and to "ensure some control over the activities of [Mrs. Wang] and the directors who have acquiesced and participated in her wrongful and oppressive course of conduct". It is with that objective that the relief in paragraph (3.5A) is sought, to prevent abuse of control of Chime. I will allow the amendments, including paragraph (3.5A).

Orders

45.In summary, I allow all the amendments sought by the joint administrators in the amendment summons save in two respects:

(1) the amendment in paragraph 39B which reads "If the votes attached to his Chime A shares had been exercised against the resolutions they could not have been passed" is disallowed; and

(2) the amendments in paragraphs 44B to 44K are allowed subject to the provision of the best particulars by the joint administrators as to the identities of the recipient directors of each of the subsidiaries that had paid out the directors' emoluments in the amounts as stated in paragraph 44H.

46.I dismiss the strike out summons of Mrs. Wang with an order nisi that she should pay the costs of the joint administrators of that application in any event and that the joint administrators' own costs are to be paid out of the estate of Mr. Wang and be taxed on a trustee basis.

47.For the amendment summons, I make the following order nisi as to costs:

(1) save as provided in (2), the costs of each of the respondents of and occasioned by the amendments to the Amended Petition are to be paid by the joint administrators in any event;

(2) the costs of the joint administrators for the hearing on 26 February 2004 are to be paid jointly and severally by Mrs. Wang, the 3rd, 6th to 9th respondents in any event; and

(3) the joint administrators' own costs are to be paid out of the estate of Mr. Wang and be taxed on a trustee basis.