Choi Tak Lan and Others v. Ng Wing Hong and Another
Read the full judgment text of HCMP 2670/2006 on BabelCite. This High Court CFI judgment was delivered on 17 July 2008.
1. These consolidated actions concern the shareholding of three companies (“Companies”):
Cited by 4 cases
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HCMP 2670/2006 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 2670 OF 2006 ____________ BETWEEN
HCMP 2671/2006 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 2671 OF 2006 ____________ BETWEEN
HCMP 2672/2006 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 2672 OF 2006 ____________ BETWEEN
(CONSOLIDATED BY THE ORDER OF ____________ Before: Mr Recorder Jat S.C. in Court Dates of Hearing: 19-23 May 2008 Date of Judgment: 17 July 2008 _______________ J U D G M E N T _______________ I. INTRODUCTION 1.These consolidated actions concern the shareholding of three companies (“Companies”):
2.The main company of the group is Data World, which was incorporated in 1987. It carried on computer networking business. Nexus and Data China are companies owned by the same shareholders as Data World. Nexus was established in August 2002 to focus on hardware end-user solutions. In December 2002, Data China was set up for the group’s China operation. 3.It is not disputed that the Companies have identical directors and shareholders with identical shareholding. All three actions involve the same set of facts, and the relief sought are also in substance the same. 4.The main issue for determination is whether the issue and allotment of 237,436 new shares in Data World, effected on or about 30 November 2004 pursuant to shareholders and board resolutions signed by its registered shareholders and directors, and corresponding transfer of shares in Nexus and Data China consequent on the change in the shareholding percentage in Data World, are valid. (For convenience, I shall refer to the November 2004 allotment of new shares in Data World and transfer of shares in Nexus and Data China collectively as “November Allotment”.) Pursuant to the November Allotment, the Defendant Mr Ng Wing Hong (“Ben Ng”) obtained 50.18% of the Companies’ shares. 5.The 1st to 5th Plaintiffs, who are the other registered shareholders of the Companies, contend that the purported shareholders and board of director meetings approving the November Allotment were “illegal, invalid and void”, hence the allotment and transfers should be cancelled. They allege that there was no agreement between the shareholders to effect the November Allotment, and that they had signed the relevant documents effecting the November Allotment without knowing that the documents included the allotment of the new shares. 6.Ben Ng, on the other hand, contends that all the shareholders and directors agreed to the November Allotment in a meeting held on 12 November 2004. The written resolutions were properly prepared to implement the resolutions so decided. Alternatively, estoppel, acquiesce and laches are relied upon. As a final fallback, if the allotment of new shares were held to be invalid, Ben Ng seeks validation pursuant to section 57C of the Companies Ordinance. 7.There are three prior actions commenced by Ben Ng, being HCMP 2274 to 2276 of 2006, for convening annual general meetings of the Companies pursuant to section 114B of the Companies Ordinance. Recorder P Fung SC heard and disposed of those proceedings in July 2007, ordering meetings to be convened. I only need to add that because of that judgment, the relief sought in these actions concerning the validity of annual general meetings held in June 2005 and June 2006 and the appointment of additional directors in those meetings have become academic. 8.Just before the commencement of the trial, on 16 May 2008, the 1st, 4th and 5th Plaintiffs, acting in person, gave notice of discontinuance of their action under O. 21 r. 2, RHC. Since the notices were given out of time, they were treated as applications for leave to discontinue their actions. Subpoenas to each of them were issued upon the application of the 2nd and 3rd Plaintiffs, but their counsel Mr K M Chong, leading Mr Ivan Cheung, informed me on instructions that attempts to serve the subpoenas had not been successful. In the end, the 1st, 4th and 5th Plaintiffs did not appear at the trial. I shall deal with their discontinuance application towards the end of this judgment. 9.In the rest of this judgment, unless expressly stated or the context indicates otherwise, when I refer to “the Plaintiffs”, I am referring only to the 2nd and 3rd Plaintiffs. II. BACKGROUND AND PARTIES 10.I shall first set out the uncontroversial background facts and introduce the parties. II (A). History of the companies and the Directors 11.In around 1983, Mr Ngo Tak Wah, Denny (“Denny”) set up a computer-related services business under the “Data World” name. Mr William Lee (“William”) was the manager of that business. Soon thereafter, the 2nd Plaintiff Mr Ho Kwok Kit (“KK”) and his brother-in-law, the 3rd Plaintiff Mr Ng Wing Hon (“WH Ng”), were invited to join as partners of that business. It is common ground that the four initial partners had expertise in electronics and computer science. 12.In around November 1987, the four partners acquired a shelf company, which they renamed Data World, to take over the business. 13.In around 1990, Ben Ng was invited to join Data World as a shareholder. He was originally a customer of Data World. He was a businessman, running a number of businesses. He was qualified as an accountant and company secretary, although he never practised either of those professions. He also had a law degree and had passed the Postgraduate Certificate in Laws, but he never practised as a lawyer. He became managing director of the Data World group of companies in June 2002. 14.Since Ben Ng joined Data World in 1990 and up to June 2005, the de facto directors of Data World were Denny, William, KK, WH Ng and Ben Ng. I say de facto because Denny was not himself a director on record, while his wife, Mdm Choi Tak Lan (“Mdm Choi”, the 1st Plaintiff) was. However, there is no dispute that Mdm Choi never attended any directors meetings, and it was always Denny who acted as a director in her place. 15.KK was an executive director until December 2003. He remained as a director of the Companies although he ceased to have any active involvement in the Companies’ affairs thereafter. He obtained his BA degree from the Chinese University in 1976. In the 1980s he obtained the Higher Diploma in Electrical Engineering and the Professional Diploma in Information Technology from the (then) Hong Kong Polytechnic. In 2005, he obtained a PhD degree in Business Administration. 16.WH Ng was a director of the Companies until 30 November 2004. He was prior to his resignation in charge of research and technical development aspects of the group’s business. He obtained his bachelor degree in Electronics Engineering from the University of Hong Kong in the early 1980s. He worked for a large computer manufacturer as designer of motherboards until 1989 when he joined Data World on a part time basis, until around 1993 when he worked full time as General Manager. 17.Denny was an executive director for China operation, while William was the director in charge of operations and accounting for the whole group. 18.For convenience, I shall refer to Denny, William, KK, WH Ng and Ben Ng collectively as “the Directors”. II (B). Changes in Shareholding up to September 2004 19.When Ben Ng joined Data World in 1990, the shareholders and their shareholding were as follows:
20.In 1994, Data World increased its share capital to $2.5 million and the shareholding, after the allotment of new shares and some transfer of shares amongst the existing shareholders, became as follows:
21.There is a dispute as to whether Mdm Choi, Mdm Suen and YF Lee held their shares on their own account or on behalf of Denny (in the case of Mdm Choi) and William (in the case of Mdm Suen and YF Lee) respectfully. I shall return to that issue later on. 22.The shareholding remained unchanged until 2004. By an extraordinary general meeting held on 28 May 2004, the share capital of Data World was increased from $2.5 million to $7.1 million by the creation of 4.6 million shares of $1 each. The general meeting also gave approval to the board to issue such of the unissued shares of the company as they in their full discretion shall determine to be in the best interest of the company. 23.By a resolution of the board of directors dated 28 May 2004, 2,613,728 shares were allotted to the existing shareholders on a pro-rata basis. 24.The next change took place in September 2004. By a board of directors meeting dated 8 September 2004, the board resolved that the remaining unissued shares (2.3 million shares) would be offered to the existing shareholders on a pro-rata basis for subscription by 22 September 2004. Any unsubscribed shares would be open for subscription by the shareholders on pro-rata basis by 29 September 2004. 25.By 30 September 2004, only Ben Ng and Mdm Choi subscribed for the new shares. The shareholding ratio after this subscription was as follows:
26.No dispute arises from the two allotments in May and September 2004. III. EVENTS LEADING UP TO THE DISPUTED ALLOTMENT 27.By October 2004, Ben Ng’s shareholding in Data World was touching 50%. His shareholding rose to 50.18% after the disputed November Allotment. It arose in the following circumstances. 28.The Directors have been in dispute about Data World’s business and management since about 1998. But despite their differences, the business remained profitable. The two camps have raised accusations and counter-accusations against each other in relation to various episodes over the years. I do not find it necessary to resolve these disputes. Suffice to say that the relationship between the Directors became increasingly tense and even acrimonious. In particular, there was considerable distrust between KK and WH Ng on the one hand, and Ben Ng on the other. 29.The evidence shows that Data World’s business was being run on a very tight cashflow. Very often the Directors were required to provide loans to enable payments to be made to suppliers. These were intended to be short-term loans, but the loans tended to accumulate. The evidence reveals that the loans owed by Data World to the Directors increased from $3.8 million as at 31 December 2001 to $4.8 million as at 31 December 2002 and to $5.2 million by 31 December 2003. 30.Out of the $5.2 million owed to the Directors as at 31 December 2003, $2.3 million, or 43.9%, was owed to Ben Ng, while just over $1 million (19.2%) was owed to Denny, $400,000 (7.6%) was owed to William, $956,000 (18.2%) was owed to KK and $581,000 (11.1%) was owed to WH Ng. It should be noted that in the documents these loans were described as “shareholders’ loans” or “directors’ loans” interchangeably, but more often as “shareholders loans”. Mdm Choi, Mdm Suen and YF Lee never provided any loan to Data World. 31.In around September 2003, the Directors began to express their wish to be repaid their loans. In particular, Denny, KK and WH Ng have indicated that they wanted to be repaid their existing loans and would not provide any further loans to finance Data World’s operations. In early 2004, Data World sold its office premises and the net proceeds of around $1.4 million were used to repay some of the Directors’ loans, in particular, the loans from Denny and KK. 32.It was in those circumstances that an increase in share capital was called for in April 2004 in order to repay part of the Directors’ loans, leading to the allotment in May 2004. However, not all the Directors’ loans were repaid after the May allotment. 33.In early September 2004, Ben Ng made another call for subscription by issuing the remaining 2.3 million shares still unissued, so as to repay all the outstanding Directors’ loans. In an email to all the Directors dated 6 September 2004, he explained that the exercise was to turn the shareholders’ equity of Data World from a negative figure of $0.7 million to a positive one of $1.6 million, so as to improve the financial standing of the company for the purpose of the forthcoming annual review by bankers and vendors. 34.On 8 September 2004, the board resolved to issue and allot the remaining 2.3 million shares to the existing shareholders. 35.According to the minutes of the 8 September 2004 meeting prepared by KK, the Directors disagreed on a number of issues concerning the future of the Data World group. I would highlight the following matters:
36.What is reasonably clear is that the prospect of Ben Ng acquiring more than 50% of Data World’s shares was raised, and there was no agreement that Ben Ng should not be allowed to acquire more than 50% of Data World’s shares. 37.Only Ben Ng and Denny applied for the new shares in the first round of the September subscription. About 1.1 million shares were therefore available for subscription in the second round. 38.On 28 September 2004, Ben Ng sent an email at 3.02pm to all the Directors informing them that if only he and Denny were to subscribe for the remaining shares, his shareholding would reach 49.76%. In an email to all Directors at 3.51 pm, KK reminded Ben Ng that the funds produced should be used to pay back the Directors’ loans and other loans as had been agreed, and that
39.On 29 September 2004, Ben Ng sent another email to all the Directors in which he stated that:
40.Eventually, no one else subscribed for any of the new shares in the second round. Hence Ben Ng’s shareholding increased to 49.76% after the September allotment as already stated above. 41.It is not disputed that the September allotment only produced net funds of $590,000 (from Ben Ng), while all Directors’ loans were repaid. 42.Data World’s cashflow did not improve. In an email dated 4 November 2004 from Doris (one of Data World’s accounts staff) to all the Directors, it was stated that there would be a cash shortage of $260,000 by the end of the month without any repayment of loans from Nexus to Data World. Ben Ng then sent an email to the Directors stating, inter alia, that:
43.There was also a problem with Data World’s bank as KK and WH Ng refused to sign certain bank guarantees for a tax loan, which was required to enable Data World to pay its tax on time. 44.On 7 November 2004, Ben Ng suggested that a board meeting be held on 12 November 2004 to discuss (inter alia) the need to call for additional capital. It was again stated in this email that the estimated cash shortfall by the end of the month was about $300,000. 45.In the meantime, the relevant documents to implement the September allotment had not been prepared. These corporate documents were always prepared by JK Asia Company Limited, which provided company secretarial services to the Data World companies. Miss Jenny Kun (“Jenny”), the principal of the firm, was the person in charge of Data World’s account. On this occasion, however, no instructions had been given to Jenny. 46.On or about 8 November 2004, WH Ng took up the matter with Jenny. It would appear that he was concerned about implementing the share allotment because it had been agreed in late October 2004 that he would leave Data World’s employment after repayment of his loans. In an email dated 8 November 2004 to Ben Ng and Doris, copied to all Directors, WH Ng stated that Jenny had told him that she had not received instructions from the board to prepare the documents, or instructions in relation to changes in shareholding in Nexus and Data China. 47.In response, Ben Ng sent an email on 8 November 2004 to WH Ng and Doris, copied to all Directors, saying that:
48.There followed emails from Denny and WH Ng confirmed that a board meeting would be held on 12 November 2004. IV. MEETING ON 12 NOVEMBER 2004 AND SUBSEQUENT EVENTS 49.All the Directors attended the meeting on 12 November 2004. There is, however, sharp dispute as to what had been agreed in that meeting. Regrettably no minutes had been prepared for this meeting. 50.The Plaintiffs claim that no minutes had been prepared because no resolution had been passed. 51.Ben Ng, on the other hand, claims that it was in this meeting that the Directors agreed to call for additional capital of $300,000 by issuing and allotting 300,000 new shares to the existing shareholders on a pro-rata basis. KK and WH Ng declared in the meeting that they would not be subscribing for any more shares, so only Ben Ng, Denny and William subscribed for the new shares. 52.I shall have to decide which version is correct. 53.I pause here to record that in the course of KK’s cross-examination, he claimed for the first time that he had in fact kept some notes he had made during the 12 November meeting. Having heard argument from counsel, and taking into account the lateness of the revelation and the prejudice to Ben Ng, I refused to allow KK to produce these notes as evidence in the trial. 54.Returning to the contemporaneous correspondence, on 13 November 2004, Ben Ng sent an email to Jenny, copied to all Directors, in the following terms:
55.No one responded to this email except Jenny, who on 15 November 2004 (the following Monday) sent an email to Ben Ng, copied to all Directors, confirming that she would prepare the documents accordingly. 56.On 18 November 2004, in an email sent to William, Doris cried out for help because Nexus was short of $80,000 needed to transfer to Data World by the following day in order that Data World could repay the Directors’ loans. William then sent an email to Ben Ng, copied to Denny, asking them what should be done. Ben Ng replied to Katherine (a staff) and William, copied to Denny and Doris, saying that
57.The sum of $150,000 was obviously a reference to the amount that Ben Ng had to pay for the shares allotted to him in the November Allotment, ie $149,274. On 19 November 2004, Doris sent an email to Ben, William and Denny acknowledging receipt of $150,000 from Data World Solutions. 58.Also on 19 November 2004 at 4.13pm, Jenny sent an email to all the Directors, asking them to review the share allocation worked out by her pursuant to Ben Ng’s instructions on 15 November. She attached to this email a worksheet setting out the shares allocation. In this worksheet, Jenny correctly calculated the number of new shares issued and allotted to Ben Ng and Mdm Choi in the September allotment. She, however, thought that all 6 registered shareholders subscribed for the $300,000 further capital in the November Allotment. 59.Ben Ng immediately responded to Jenny by email at 4.55pm on the same day, also copied to all the Directors. In this email, Ben Ng informed Jenny that:
60.Jenny then reworked the worksheet and sent the revised version to Ben Ng and all the Directors at 5.32pm on 22 November 2004. The revised worksheet showed that only Ben Ng, Mdm Choi, Mdm Suen and YF Lee participating in the $300,000 subscription, with a total of 237,436 new shares issued and allotted to them. The revised worksheet also set out the new shareholding percentage after completion of the November Allotment, stating unequivocally that Ben Ng’s shareholding became 50.18%. 61.At 12.59am on 23 November 2004, Ben Ng sent an email to Jenny, copied to all Directors, instructing her to proceed. At 5.28pm on 23 November 2004, Jenny sent an email to William, copied to all Directors, informing William that all the documents had been prepared and would be sent to William the following morning, and asked him to have the documents signed and returned to her for filing. 62.On 23 November 2004, an email from William to Denny and Roland (another staff) stated that $600,000 would be needed within the week to settle some urgent accounts payable. It is not clear from this email which company needed the money, but other emails indicate that it was Data China. 63.In response to this email, Roland informed William and Denny that the “most optimistic expection [sic]” was that $300,000 could be remitted to Hong Kong. Denny then sent an email to William and Ben Ng, stating that:
64.William responded by an email on the same date to Denny and Ben Ng, saying that:
65.By letter dated 23 November 2004, Jenny sent to William 3 sets of documents (1 set each for Data World, Nexus and Data China) for execution. The documents included Minutes of Extraordinary General Meetings, Consent to Short Notice, Board Minutes approving the allotment of new shares, Application for Shares, documents for transfer of shares of Nexus and Data China, share certificates, etc, to implement the September and November allotments in one go. 66.The Directors and all the shareholders signed these documents where their signatures were required. In the case of KK and WH Ng, they assert that they signed those documents they were asked to sign in great hurry thinking that they were for the September allotment only. The documents that stated the issue of 237,436 new shares did not require their signature and they did not know that those new shares had been allotted. 67.On 26 November 2004, William issued a cheque for $38,156 “for call capital” and paid it into Data China’s bank account. That sum represented the exact amount Mdm Yuen and YF Lee had to pay for the new shares in Data World they had subscribed for in the November Allotment. It would appear that the money was paid into Data China’s account because that company was in need of cash. 68.Similarly, Denny paid $50,000 into the account of Data China, when Mdm Choi was required to pay $50,006 for her subscription in the November Allotment. 69.Ben Ng did send an email to William and Denny, telling them that the money should be paid into Data World first “to satisfy auditor’s requirement for cash payment for share issues. You can then transfer the money to [Data China] as loan”. This email was copied to other staff, including Doris and Katherine. However, it probably came too late as William and Denny had already paid the money into Data China’s account. 70.On 30 November 2004, Jenny sent an email to Ben Ng, copied to all the Directors, informing them that the documents effecting the November Allotment had been filed and stamped, and summarised the work done as follows:
71.No one responded to raise any query or objections. V. EVENTS AFTER NOVEMBER 2004 LEADING UP TO LITIGATION 72.None of the Plaintiffs raised any complaint about the November Allotment until months later. However, all was certainly not well as the power struggle amongst the Directors continued. 73.Matters came to a head in a board of directors meeting of Data World which took place on 27 May 2005. The minutes of this meeting showed that in the course of the meeting, and without prior notice, Denny proposed to remove Ben Ng as managing director. KK and William, the other directors present, supported the motion. Ben Ng protested against the motion for want of prior notice and insisted that he would continue to act as managing director. Eventually KK proposed that the motion should be brought up in the next board of directors meeting for confirmation. 74.The next board meeting took place on 30 May 2005. Ben Ng was present in Data World’s office but he did not take part in this meeting. Before the meeting commenced, Ben Ng went to the meeting room and informed the other directors that he would not take part and produced two solicitors letters, one calling for an extraordinary general meeting and the other to cancel the meeting. The other directors proceeded to hold the meeting and resolved to confirm the removal of Ben Ng as managing director. KK was appointed as the new managing director and WH Ng was appointed general manager responsible for the company’s business in Hong Kong. 75.On 6 June 2005, Ben Ng’s solicitors sent a letter to all the other Directors reiterating that the purported removal of Ben Ng as managing director was invalid, and that actions were at hand to stop their actions. 76.Also on 6 June 2005, Ben Ng sent an email to all Data World and Nexus staff stating that the board decision to remove him was invalid, that he had instructed solicitors to commence legal proceedings against the other Directors, and that as managing director he has terminated all executive duties of William, Denny and KK as well as power and duties of KK, William and Mdm Choi (who was, of course, a director on record although she was always represented by Denny). 77.Ben Ng then attempted to convene an extraordinary general meeting on 20 June 2005 to appoint 3 additional directors. The other shareholders snubbed that meeting and it had to be adjourned for lack of quorum. 78.On 24 June 2005, a board of directors meeting was held. Ben Ng attended this meeting. It was during this meeting that the November Allotment was formally challenged for the first time. A number of points arise from the minutes of this meeting, as prepared by KK.
79.Ben Ng, in turn, proposed his revisions to the minutes, although his proposed revisions did not receive approval from the other Directors. In relation to his shareholding, Ben Ng proposed the following amendment to the second bullet point:
80.On 27 June 2005, at the adjourned extraordinary general meeting attended by Ben Ng alone, Ben Ng appointed 3 new directors to the board. 81.On 5 August 2005, Ben Ng sent a draft buy-out agreement to the other Directors proposing to buy out their shares in the Companies on the basis that the November Allotment was valid. There is no dispute that the parties did discuss the buy-out proposal but no agreement could be reached on the price. 82.The impasse continued until May 2006, when it was time for the next annual general meeting. Ben Ng issued a notice convening the meeting on 8 June 2006. But again, no one other than Ben Ng attended the meeting which had to be adjourned. Eventually, no valid annual general meeting took place. 83.It is unnecessary to recount the details of the dispute between the two camps thereafter. 84.On 4 November 2006, Ben Ng commenced proceedings pursuant to section 114B of the Companies Ordinance to convene annual general meetings of Data World, Nexus and Data China. These originating summonses came to be known as “Ng’s Proceedings” and were disposed of by Recorder Fung SC’s judgment dated 27 July 2007. 85.On 20 December 2006, the Plaintiffs commenced the present proceedings. VI. SUMMARY OF PLAINTIFFS’ CASE 86.The main case advanced by the Plaintiffs is that there was no agreement reached on the November Allotment. They contend that no valid shareholders’ meeting had been held whether on that date or otherwise. 87.In relation to the written resolutions dated 30 November 2004, the Plaintiffs claim that they did not realise the contents of the documents, which they had signed in a hurry thinking that they accurately reflected changes consequent upon the September allotment, and that they had no reason to believe otherwise. 88.In relation to the meeting on 12 November 2004, the Plaintiffs contend that it was a board of directors meeting, not a shareholders meeting, and no notice of shareholders meeting had been given to all the shareholders. The Plaintiffs rely on the fact that Mdm Choi, Mdm Suen and YF Lee did not attend the meeting on 12 November 2004. 89.As to the emails sent by Ben Ng and Jenny between 13 November and 30 November 2004, the Plaintiffs claim that they either did not receive them or had not read them at the material time, hence they did not respond and did not have notice of the allotment of 237,436 shares. Nor had those emails been sent to all the shareholders who were not also directors. 90.Mr Chong, counsel for the Plaintiffs, also pointed out that while Ben Ng’s primary case at trial was that agreement had been reached in the 12 November 2004 meeting, no mention of that fact had been made in his amendments to the minutes of the 24 June 2005 board meeting, nor in the first solicitors letter dated 5 December 2006 responding to the Plaintiffs’ letter before action dated 24 November 2006. VII. SUMMARY OF DEFENDANT’S CASE 91.Mr Lawrence Ng, leading Mr Gary Lam, on behalf of Ben Ng contended that the evidence showed that agreement had been reached on the allotment of 300,000 new shares (eventually only 237,456 shares were allotted) because of the need to raise further capital. That need arose from the demand by the Directors, including the Plaintiffs, to be repaid their loans. Having agreed to raise capital in order that they are repaid their loans, it is unjust and inequitable for them to go back on their words. 92.Counsel pointed out that Mdm Choi, Mdm Suen and YF Lee did participation in the November subscription and were allotted shares. Denny (on behalf of Mdm Choi) did pay for the shares allotted, as did William (on behalf of Mdm Suen and YF Lee). These acts were inexplicable if there had been no agreement on the allotment of new shares. 93.Counsel further submitted that the lack of formal notice to Mdm Choi, Mdm Suen and YF Lee could not avail the Plaintiffs since it was clear that at all material times, Denny and William always acted on their behalf which was the accepted practice over the years. VIII. DISCUSSION 94.In their written closing submissions, counsel for the Plaintiffs warned me not to approach the credibility of witnesses merely on their demeanour which could be deceptive. Rather, I should consider any factual assertion of a witness having regard to the undisputed evidence or contemporaneous documents: (Lord) Patrick Devlin, The Judge (1979) at page 63, citing a speech given extra-judicially by Mr Justice MacKenna. 95.I propose to adopt the approach advocated by the Plaintiffs; indeed, that is why I have set out the objective facts as disclosed by the contemporaneous documents at length in earlier parts of this judgment. The only refinement to that approach that I may possibly add is that one must also judge any assertion of fact against the inherent probabilities of that event happening, again against the background of the undisputed facts or contemporaneous records. 96.Adopting that approach, I am unable to accept the evidence of KK and WH Ng that they did not agree to the November Allotment. My reasons are as follows. 97.First, I reject their suggestion that there was in fact no need to call for any further capital. There is ample documentary evidence that Data World (and Nexus and Data China) were constantly in need of cash. Further, the contemporaneous documents fully support Ben Ng’s case that the Directors wanted their loans repaid and were not prepared to extend further loans. It was thus necessary for a further call of capital in November 2004 when $300,000 cash was needed by the end of that month. 98.Second, I note that Ben Ng made no attempt to hide the November Allotment from anyone. His email of 13 November 2004 was sent to all the Directors, asking them to respond if he had misunderstood the position. That email strongly supports his case that the November Allotment had been agreed in the meeting held on the previous day. Likewise all the emails and worksheets from Jenny, and replies from Ben Ng, were copied to all the Directors. 99.Although KK and WH Ng did not respond to these emails, their silence is consistent with Ben Ng’s case that they had declared in the 12 November 2004 meeting that they would not subscribe for any new shares, hence they did not feel the need to respond. 100.I am unable to accept their claim that they had not received or read any one of those emails. 101.Third, there is no dispute that William and Denny did get these emails and subscribed for shares in the November Allotment. There can be no explanation other than that they had agreed to the subscription and allotment of shares. 102.Fourth, I take note of the fact that KK or WH Ng did not raise any complaint until several months after the November Allotment. No satisfactory explanation for this delay has been given by them in their affirmations or in their oral evidence. 103.In contrast, I find Ben Ng’s evidence to be credible, mainly because his evidence is consistent with the contemporaneous documents and accords with inherent probabilities. It is true that he did not expressly refer to the 12 November 2004 meeting when he attempted to amend the minutes of the June 2005 board meeting, but what he did write was, in substance, that the Directors had agreed to the allotment so there was nothing to talk about. The same observation applies to the solicitors’ response to the Plaintiffs’ letter before action. I accept his evidence as being truthful. 104.Jenny also gave evidence. She is an independent witness, and she confirmed in her oral evidence that she had prepared the worksheets showing the results after the November Allotment, and that her staff upon her instructions prepared the necessary documents to effect the changes. I am conscious of the fact that the format of the board minutes effecting the November Allotment deviated from similar documents previously prepared by her firm for the Companies, in that the previous minutes provided space for each of the directors to sign against their names, whereas the ones on this occasion did not have such space hence the directors were not required to sign the minutes. However, Jenny confirmed in evidence that the documents were prepared by her staff according to her instructions, but she did not pay particular attention to the format, and that both types were appropriate. She said firmly that there was no intention to hide anything from anybody. I have no reason to doubt her evidence, and in my judgment she is a credible witness whose evidence I fully accept. 105.In the circumstances, I find that the Directors did agree in the 12 November 2004 meeting to the issue and allotment of 300,000 shares, and that the November Allotment was done pursuant to that agreement. 106.That leaves the question of shareholders’ consent. In this regard, I am satisfied, and I do find, that Mdm Choi, Mdm Suen and YF Lee held their shares on behalf of Denny and William respectively. The evidence shows clearly that Denny and William always acted as if they were themselves shareholders, and for all purposes Denny and William were acknowledged and treated as shareholders of the Companies. That being the case, there was consent of all the beneficial shareholders. 107.In any case, I have no hesitation in finding that even if Mdm Choi, Mdm Suen and YF Lee were the beneficial owner of the shares registered in their names, they did, through Denny and William, agree to the November Allotment. This is made abundantly clear by their subscription and payment for shares in the exercise. None of them have explained their action in their affirmations, and no reasonable explanation had been given. 108.Since William, Denny, Mdm Choi, Mdm Suen and YF Lee signed the relevant documents effecting the November Allotment and did pay the subscription money for the new shares, there can be no question that they did consent to the allotment. 109.In the light of the above findings, it is unnecessary to consider Ben Ng’s alternative arguments. IX. RESULT 110.I am not inclined to grant leave to the 1st, 4th and 5th Plaintiffs to discontinue the action. The applications to discontinue are dismissed. 111.I therefore dismiss the 1st to 5th Plaintiffs’ claim, with an order nisi that costs should be to the Defendant, to be taxed if not agreed.
Mr. Lawrence Ng and Mr. Gary C.C. Lam, instructed by Messrs Chui & Lau, for the 1st Defendantin all cases Mr K.M. Chong and Ivan Cheung, instructed by Messrs K M Lai & Li, for the 2nd and 3rd Plaintiffs in all cases 1st, 4th and 5th Plaintiffs in all cases, in person, absent 2nd Defendant in HCMP 2670/2006, in person, absent 2nd Defendant in HCMP 2671/2006, in person, absent 2nd Defendant in HCMP 2672/2006, in person, absent Appeal refused: see CACV267/2008 dated 27 February 2009 |
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