Securities and Futures Commission v. Fung Chiu and Others
Read the full judgment text of HCMP 2524/2006 on BabelCite. This High Court CFI judgment was delivered on 6 October 2009.
1. This is an Amended Petition brought by the Securities and Futures Commission (“SFC”) under section 214(1) of the Securities and Futures Ordinance, cap. 571 against the respondents, who are former executive directors of GP NanoTechnology Group Limited (in liquidation) (“the Company”). The SFC primarily seeks an order against each of the respondents disqualifying them from being directors of any corporation or from taking part in the management of any corporation for a period specified by the C
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HCMP2524/2006 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 2524 OF 2006 ____________
____________ BETWEEN
____________ Before : Hon Chu J in Court Date of Hearing : 6 October 2009 Date of Judgment : 6 October 2009 Date of Reasons for Judgment : 13 October 2009 ---------------------------------------------------- REASONS FOR JUDGMENT ---------------------------------------------------- 1.This is an Amended Petition brought by the Securities and Futures Commission (“SFC”) under section 214(1) of the Securities and Futures Ordinance, cap. 571 against the respondents, who are former executive directors of GP NanoTechnology Group Limited (in liquidation) (“the Company”). The SFC primarily seeks an order against each of the respondents disqualifying them from being directors of any corporation or from taking part in the management of any corporation for a period specified by the Court. Consequent upon his death, the proceedings against the 4th respondent were discontinued on 21 September 2009. As against the 2nd and 5th respondents, the proceedings had been disposed of by way of the Carecraft procedure. 2.The present hearing relates to the 1st and 3rd respondents. Both of them, despite being served with the papers and notified of the hearing, were absent at the hearing. The SFC had called five witnesses, namely, Miss Leung So Ching, the case officer responsible for the inquiry into the Company, Miss Vickie Ng Lai Lin, the forensic accounting expert, Mr Tso Sze Wai, the finance manager and company secretary of the Company, Miss Tse Wa, the executive secretary of the Company, Miss Wu Wing Yan, the accountant of the Company and also the 5th respondent. 3.At the conclusion of the SFC’s case against the 1st and 3rd respondent, I made a disqualification order against each of them for a respective period of seven and six years. My reasons for the Judgment appear below. Background facts 4.The facts upon which the SFC based its case against the respondents, and as set out in the Amended Petition, are contained in Schedule 1 to the Judgment of Kwan J (as she then was) dated 27 November 2008, dealing with the disqualification order against the 2nd respondent: [2009] 2HKC 19, 24. On the evidence in this hearing against the 1st and 3rd respondents, I am satisfied that these facts have been proved. For the present purpose, I will not repeat them. I will only refer to the more salient facts. 5.The Company was incorporated in Bermuda on 17 July 2000 and registered in Hong Kong under Part XI of the Companies Ordinance, cap. 32 on 13 November 2000. The Company was an investment holding company. The principal manufacturing and operating arm of the group was a PRC Corporation called Guang Ping Chemical Industrial Enterprise Co Ltd (“Guang Ping”), which is a wholly owned subsidiary of the Company. 6.On 17 July 2001, the Company was listed on the GEM of the Hong Kong Stock Exchange by way of placing. From the placement, the Company raised a net total of about HK$ 44 million. On 7 August 2003, trading in the shares of the Company was suspended. On 10 June 2005, the Company was de-listed. 7.By order dated 17 August 2005, the Company was compulsorily wound up. 8.The five respondents were appointed the executive directors of the Company in October 2000. The 1st respondent was the chairman of the board. Both the 1st and 3rd respondents are residents in mainland China. 9.Apart from the respondents, the Company had, up to 25 March 2003, two independent non-executive directors and an audit committee comprising the two non-executive directors and the 5th respondent. 10.On the face of the matter, one Ms Wong Yau Ming (“Wong”), through her shareholdings in Modern World Resources Limited and indirectly in Solidbase Holdings Limited, was at all material times the ultimate controlling shareholder of the Company. Modern World Resources Limited and Solidbase Holdings Limited were two of the three substantial shareholders of the Company. However, the person who actually operated, managed and controlled the business and affairs of the Company was one Mr Cheung Long Chung (“Cheung”), who was neither a director nor a shareholder. Cheung also controlled the finances of the Company and was a bank signatory of the bank accounts of the Company and its subsidiaries, including Guang Ping. Five questionable transactions 11.The SFC’s complaint against the respondents stems from five transactions entered into by the Company or Guang Ping in 2001. They had been referred to in these proceedings as: (1) the Heilongjiang Investment; (2) the Enping Investment; (3) the Honvest Loan; (4) the Enping Chemical Loan; and (5) the Global Essence Advances. 12.Briefly put, the first two transactions involved proposed investment projects by Guang Ping in Heilongjiang and Enping. For the Heilongjiang Investment, a Letter of Intent to acquire a plant in Heilongjiang was signed in October 2001, based upon which a deposit of RMB 7 million was paid to the Heilongjiang party. Subsequently, the transaction did not proceed through. However, only RMB 2 million of the deposit paid was returned, resulting in a loss of RMB 5 million. As for the Enping Investment, an Agency Agreement dated 28 November 2001 was signed appointing an Enping government-owned agent to negotiate for the acquisition of a controlling interest in a plant in Enping. Shortly thereafter, RMB 6 million was paid to the Enping agent as guarantee money. The project did not proceed. However, only RMB 4 million of the guarantee money paid was returned, resulting in a loss of RMB 4 million. 13.The 3rd and 4th transactions are loans made by Guang Ping to two corporations, Honvest Manufacturing Limited and Enping Chemical Industrial Company, which were its former shareholders. The former is a Hong Kong company and the latter a state-owned PRC enterprise. The loans were in the respective sums of RMB3.43 million and RMB 6.61 million. They were both interest free and unsecured. The Company had in two clarification announcements issued on 14 January and 5 March 2003 (respectively “the 1st and 2nd Clarification Announcements”) stated that these loans had been fully settled. Due to the lack of documentation, the SFC is not in a position to say that this is not the case. 14.The 5th transaction involved a series of advances made by the Company to a company called Global Essence Holdings Limited (“Global Essence”), in which Cheung was indirectly interested. The Company had entered into a Consultancy Services Agreement dated 20 July 2001 with Global Essence. From two schedules supplied by the Company to the SFC, the amount of advances to Global Essence between 1 March 2001 and 14 March 2002 totalled over HK$17 million. The first of the advances was recorded to be made on 1 March 2001, at a time when Global Essence was not even incorporated. As at 17 March 2002, the outstanding balance due from Global Essence was in excess of HK$11 million. The advances were all interest free and not secured by any collateral. In the 2nd Clarification Announcement, it was stated that all the outstanding advances had been settled on 30 September 2002. The forensic accounting expert of the SFC had analyzed three of the repayments recorded on the schedules in the total sum of HK$8.5 million made between 18 and 23 March 2002. In her conclusion, which I accept, there was only one sum of HK$3 million that came from Cheung’s personal bank account. After it was deposited into the account of the Company’s subsidiary, GP Nano (H.K.) Limited, to constitute the first repayment, the sum was being continuously circulated between various bank accounts of GP Nano (H.K.) Limited, Cheung and some third parties to constitute the second and third repayments of HK$2.5 million and HK$3 million. The upshot of all these is that there is in truth no repayment to the tune of HK$8.5 million as represented by the Company, hence there is no full repayment of the advances by Global Essence. Section 214(1), cap. 571 15.Section 214 (1) of the Securities and Futures Ordinance provides:
16.In the present case, the SFC relies on subsections (b) to (d) against the respondents. 17.Under section 214(2)(d) of the Ordinance, the Court may upon such an application order that a person wholly or partly responsible for the business or affairs of the corporation having been so conducted shall not, “without the leave of the Court (i) be, or continue to be, a director, liquidator, or receiver or manager of the property or business, of the corporation or any other corporation; or (ii) in any way, whether directly or indirectly, be concerned, or take part, in the management of the corporation or any other corporation, for such period (not exceeding 15 years) as may be specified in the order.” 18.Mr Chow SC submitted, and I agree, that under section 214(1), three conditions have to be satisfied. They are:
19.Under the second condition that the business or affairs must be that of the listed corporation, in the context of a group of companies, it is possible that, depending on the facts, the business or affairs of one company may also be that of another company. As was observed by Sir Martin Nourse in Gross v. Rackind [2004] EWCA Civ 815, at para.26,
See also Nicholas v. Soundcraft Electronics Ltd [1993] BCLC 360; Arrow Nominees Inc v. Blackledge [2000] 2 BCLC 167: and Jesner v. Jarrad Properties Ltd [1993] BCLC 1033. 20.In my view, a realistic approach should be adopted in considering whether the affairs of a subsidiary may be regarded as that of the holding company. In cases where, as here, the principal business and activities of the group is undertaken by the subsidiary in question and the listed company is essentially an investment holding vehicle, it is legitimate for the Court to take a broad and overall view of the situation and to regard the affairs of the subsidiary as the affairs of the holding corporation. 21.As for the third condition of showing misconduct falling within the meaning of section 214(1)(a) to (d), subsection (1)(b) encompasses four concepts: defalcation, fraud, misfeasance and other misconduct. In the present case, the SFC relies on misfeasance and other misconduct. “Misfeasance” is defined in section 1, Part 1 of Schedule 1 to the Ordinance to mean “performance of an otherwise lawful act in a wrongful manner”. “Other misconduct” are ordinary English words, connoting improper or wrong behaviour or mismanagement, culpable neglect of duties: Shorter Oxford Dictionaries (6th edition, 2007). In Re Riverhill Holdings Ltd [2007] 4 HKLRD 46, 53 at para.15, the Court was satisfied that a case of misconduct under section 214(1)(b) was made out against a director who was found to have failed to exercise the degree of skill and care as may reasonably be expected of a person of his knowledge and experience and holding his office and functions within the company in question. 22.In respect of subsection (1)(d), it covers unfairly prejudicial conduct towards members of the company. There is a substantial body of authorities on the meaning of “unfairly prejudicial conduct”. For the present purpose, it suffices to note the observations of Rogers J (as he then was) in SFC v. Chesterfield Limited, HCMP 3504/1994 (unreported, 22 May 1995), when dealing with the term in the context of section 37A(1) of the repealed Securities and Futures Commission Ordinance, cap.24:
Findings 23.With these legal principles in mind, I turn to the facts of the present case. The first condition of section 214(1) is clearly met, as the Company is a publicly listed company. 24.As to the second condition under the section, looking at the realities in this case, I accept that the affairs of Guang Ping can properly be regarded as the affairs of the Company, having regard to the fact that the former is a principal subsidiary and the Company is in essence an investment holding vehicle. 25.Turning then to the third condition of misconduct on the part of the 1st and 3rd respondents, the SFC’s complaints against them fall into five heads as follows:
26.I shall deal with these five heads in turn. (1) 1st head of misconduct 27.The 1st and 2nd Clarification Announcements were issued by the Company on the request of the Hong Kong Stock Exchange after there were complaints against the Company about lack of explanation for acquisition of investments for which deposits and loans had been made to third parties. In the two announcements, it was stated that the directors of the Company collectively and individually accepted full responsibility, and that they, having made all reasonable enquiries, confirmed to the best of their knowledge and belief: (i) the information contained in the announcements was accurate and complete in all material respects and not misleading; (ii) there were no other matters the omission of which would make any statement therein misleading; and (iii) all opinions expressed therein had been arrived at after due and careful consideration and were founded on bases and assumptions that were fair and reasonable. 28.In respect of the Heilongjiang Investment, the Letter of Intent was signed by the 3rd respondent. In written answers that he provided to the SFC, he stated that he did so under the instruction of Cheung and the 4th and 5th respondents and that he knew nothing about the project and had not seen any documentation about it. The 1st respondent, in his interview with the SFC, stated that the 4th respondent had given a verbal briefing about the project, but did not provide any documentation, and he himself had not seen the Letter of Intent before it was signed. In respect of the board minutes dated 31 December 2001 ratifying the payment of the RMB 7 million deposit, both the 1st and 3rd respondents stated that they were arranged to sign it. The 1st respondent claimed that a board meeting was held in December 2001 to confirm the project. The 3rd respondent, on the other hand, had no recollection of attending a board meeting on 31 December 2001. According to the 5th respondent, who had given a statement to the SFC and was called as a witness in this hearing, and whose evidence I accept, it was in the course of audit in about March 2002 that the minutes dated 31 December 2001 was made out and was back-dated. On Cheung’s instruction, the minutes was prepared and sent to the executive directors to sign. The SFC’s investigations did not find any board minutes showing that the proposed acquisition of the plant in Heilongjiang, the payment of the deposit or other terms of the Letter of Intent had been considered or discussed by the Board. There was also no documentation or record on the cancellation of the project and of the Letter of Intent. The 5th respondent also stated that, upon the auditor’s request, the 4th respondent had on 15 March 2002 given an undertaking to the board regarding the recoverability of the deposit for the proposed acquisition. However, when the Heilongjiang party failed to return the balance of RMB 5 million deposit, the Company took no step to enforce the undertaking given by the 4th respondent. 29.In the 1st Clarification Announcement, however, it was stated that the signing of the Letter of Intent had been approved by the Board (excluding the independent non-executive directors) after considering detailed information about the Heilongjiang project provided by the Heilongjiang party. The 2nd Clarification Announcement also stated that the terms of the Letter of Intent had been discussed by the Board (excluding the independent non-executive directors) after considering details of the Heilongjiang plant that were provided by the Heilongjiang party. It further stated that the board had convened a meeting on 31 December 2001 to ratify the payment of RMB 7 million deposit for the acquisition. 30.In these circumstances, the 1st and 2nd Clarification Announcements clearly contained false or materially misleading statements of fact about the Heilongjiang Investment. 31.As for the Enping Investment, the proposed investment in the Enping plant was introduced to the Company by the 3rd respondent. In his written answers to the SFC, he stated that he conducted the negotiations under the authorisation of Cheung and the 5th respondent. He had no recollection of attending any board meeting to approve the Agency Agreement or discussing the project with any other director. The 1st respondent, in his interview with SFC, claimed that there was a board meeting to discuss the project and the 3rd respondent had given a verbal introduction of it, but no documentation was provided. He stated further that he did not know about the payment of the RMB 8 million guarantee money. The investigations by the SFC did not find any board minutes showing that the proposed acquisition of the plant in Enping, the payment of the guarantee money or any of the terms of the Agency Agreement had been discussed or considered by the board. There was also no documentation regarding the negotiation or the subsequent cancellation of the project and of the Agency Agreement. According to the statement of the 5th respondent, on the auditor’s request and Cheung’s instruction, a board minutes dated 31 December 2001 was prepared and signed by the executive directors in March 2002 to ratify the payment of the RMB 8 million guarantee money. 32.In the 1st Clarification Announcement, however, it was stated that the Agency Agreement had been approved by the board (excluding the independent non-executive directors) after considering details of the Enping plant that were provided by the Enping agent. In the 2nd Clarification Announcement, it also stated that the terms of the Agency Agreement had been discussed by the board in November 2001 after considering the details of the Enping plant provided by the Enping agent. It further stated that the board had held a meeting on 31 December 2001 to ratify the payment of the RMB 8 million guarantee money for the acquisition of the plant. 33.These statements of fact in the 1st and 2nd Clarification Announcements are false or misleading in a material way in that there is no factual basis for believing that the board had discussed, let alone approved, the terms of the Agency Agreement and that no board meeting was in fact held on 31 December 2001 to ratify the payment of the guarantee money. 34.In relation to the Honvest Loan and the Enping Chemical Loan, the loan agreements were signed by the 3rd respondent. In his written answers to the SFC, the 3rd respondent stated that the loans were in fact arranged by Cheung and the 5th respondent. The 1st respondent in his interview with the SFC denied having any knowledge about the loans and claimed that the payments were arranged and controlled by Cheung, Wong and the 5th respondent. He confirmed having signed the board minutes dated 31 December 2001 to ratify the loans, but stated that he had made no enquiries about the transactions before signing. Apart from the loan agreements, there is no other documentation evidencing discussion, deliberation or approval of the loans by the board. The evidence of the 5th respondent is that the 31 December 2001 minutes was prepared in March 2002 upon the auditor’s request and at Cheung’s instruction. 35.In the 1st Clarification Announcement, it was stated that the two loans were approved by the board (excluding the independent non-executive directors). The 2nd Clarification Announcement further stated that the Honvest Loan and the Enping Chemical Loan were discussed by the board in January and April 2001 respectively and that a board meeting was held on 31 December 2001 to ratify the granting of the loans. 36.These statements of fact in the 1st and 2nd Clarification Announcements are false or misleading in a material way in that there was no discussion nor approval of the loans by the executive directors and no board meeting was held on 31 December 2001 to ratify the loans. 37.With respect to the Global Essence Advances, the Consultancy Services Agreement was signed by the 1st respondent. In his interview with the SFC, the 1st respondent said he did so on the instruction of Cheung and Wong and the matter had not been discussed among the directors. He said he had no knowledge of the amount of advances involved or who caused or authorised the advances to Global Essence. He also stated that Global Essence did not refer any project to the Company. The 3rd respondent denied any involvement in the dealings with Global Essence. There was a document purporting to be minutes of a board meeting on 19 July 2001, recording that the Consultancy Services Agreement was approved and the 1st respondent was authorised to sign it. The document was only signed by the 1st respondent. 38.In both the 1st and 2nd Clarification Announcement, it was stated that the Consultancy Services Agreement had been approved by the board (excluding the independent non-executive directors). This representation of fact is on the 1st and 3rd respondent’s own statements to the SFC, evidently false or materially misleading. 39.In addition, the 1st and 2nd Clarification Announcements also stated the following:
40.These statements are false or materially misleading in a number of ways. First, Global Essence was not an independent third party. Cheung was interested in Global Essence indirectly and was described as an employee of Global Essence in an account service registration form with HSBC. According to the 5th respondent, Cheung had told him that he controlled Global Essence. On the other hand, Cheung was at all material times the real controller of the Company. The evidence shows that he was a shadow director of the Company and managed its affairs and finances. Second, there is no material to support or show that Global Essence had made any referral of projects or provided consultancy service to the Company. There is no evidence of any feasibility report provided by Global Essence. Third, from the two accounting schedules provided by the Company, the advances made to Global Essence were in far excess of HK$ 9.43 million and extended beyond December 2001. Fourth, the evidence of the forensic accounting expert demonstrates that the three purported repayments made between 18 and 23 March 2002 and totalling HK$8.5 million did not take place as represented in the two schedules. It is therefore highly doubtful whether there was in fact full settlement of the advances to Global Essence. (ii) 2nd head of misconduct 41.Clearly, from the matters set out under the 1st head of misconduct, the 1st and 3rd respondents, despite being the chairman of the board and an executive director, took no interest in and did not concern themselves with the affairs, finances and management of the Company. They were content to follow the instructions of Cheung, notwithstanding that he was neither a director nor an officer of the Company. Cheung was in fact allowed to have unchecked control over the finances and affairs of the Company. In the circumstances, each of the 1st and 3rd respondents had abdicated their responsibilities as executive director of a publicly listed company and further failed to carry out their duty to safeguard the interests of the Company and its shareholders and the investing public. (iii) 3rd head of misconduct 42.The SFC’s case under the 3rd head of misconduct is that each of the 1st and 3rd respondents failed to exercise reasonable skill, care and diligence in the management of the Company and/or failed to act in the best interest of the Company, which is both contrary to their common law of duty of care and fiduciary duty and also contrary to Rule 5.01 of the GEM Listing Rules, with which each of them had, prior to the listing of the Company, given a written undertaking to the Hong Kong Stock Exchange to comply to the best of his ability. 43.The relevant part of Rule 5.01 states:
44.Apart from the matters set out under the 1st head of misconduct, the following aspects of the five transactions are also relevant to show the failure in duties on the part of the 1st and 3rd respondents. First, in respect of the Heilongjiang Investment and Enping Investment, having regard to the substantial amounts involved, the executive directors, including the 1st and 3rd respondents, acting reasonably and with due care and diligence, ought to have consulted the independent non-executive directors on the proposed acquisitions before entering into the Letter of Intent and the Agency Agreement. Further, before paying substantial sums for the deposit or guarantee money, there was no proper study and evaluation of the proposed acquisitions, its feasibility and commercial viability, and also the credit risks involved in making the payments. There was also no proper discussion among the executive directors and no prior approval was given by the board for the payments. The two payments were not made in the best interest of Guang Ping, and in turn the Company, in that there was no adequate information about the proposed acquisitions, that there was no proper deliberation by the board, that the deposit/ guarantee money was paid without proper authority of the board, and that the money was not held in an escrow account, but was paid over to the Heilongjiang party and Enping agent with no security provided in return. There was at the same time, no document evidencing the allege repayment of RMB 4 million by the Enping agent. 45.Second, in relation to the Honvest Loan and the Enping Chemical Loan, given that the granting of the loans was not in the normal course of business of Guang Ping and having regard to the substantial amount involved, the executive directors (including the 1st and 3rd respondents), acting reasonably and with due care and diligence, ought to have consulted the independent non-executors before granting the loans. The granting of these two loans was further not made in the best interests of Guang Ping, and in turn the Company, in that they were granted without proper authority of the board, that the money was lent for an indefinite term with no date fixed for repayment, that no interest was charged and no security was given for them, and additionally were not made within the normal course of business of Guang Ping. 46.Third, with regard to the Global Essence Advances, they were extraordinary transactions. There was no basis at all for the series of very substantial advances made to Global Essence. Despite the Consultancy Services Agreement between the Company and Global Essence, none of the advances was shown to be in any way related to the agreement or services rendered to the Global Essence. In effect, funds were continuously drained out of the Company without any proper purpose, justification or authority. The advances were all for an indefinite term with no fixed date for repayment, with no interest charged on them and were not secured by any collateral. The granting of the advances is plainly not in the interests of the Company. (4) 4th head of misconduct 47.The 4th head of misconduct relates to the descriptions of the duties of the executive directors in the prospectus and the annual reports of the Company. In the prospectus dated 9 July 2001 (at p.34), it is expressly stated that:
48.In the prospectus and also the 2001 and 2002 annual reports of the Company, the 1st respondent was described as the chairman of the Company responsible for the strategic planning, corporate policy and overall management of the Group. As for the 3rd respondent, he was described as an executive director of the Company responsible for the daily operations of Guang Ping. 49.These representations as to the duties and responsibilities of the 1st and 3rd respondents as executive directors of the Company were false or misleading for, in truth and in fact, the overall management and operation of the business and affairs of the Company were under the control of Cheung and the 1st and 3rd respondents, as the above analysis shows, took no charge of and merely acted on Cheung’s directions and instructions on matters relating to the Company or its subsidiaries. Further according to the 5th respondent, the 1st respondent was only responsible for running the factory production in Enping. (5) 5th head of misconduct 50.The 5th head of misconduct concerns the numerous breaches of rules and regulations by the Company, which the respondents had caused or allowed or permitted, within the short duration of its being listed on the GEM. The breaches include:
51.By the time the Company was de-listed on 10 June 2005, the 2003 final audited results, the 2004 first quarter results and the 2004 interim results remained unavailable. These breaches were admitted by the Company and its executive directors. 52.In addition, on 8 June 2006, the GEM Listing Committee of the Hong Kong Stock Exchange: (1) publicly censured the Company for breach of Rule 17.11 of the GEM Listing Rules (requiring an issuer to respond promptly to enquiries made of it by the Hong Kong Stock Exchange concerning unusual movements in the price or trading volume of its listed securities or any other matters); (ii) publicly censured, inter alia, the 1st respondent for breach of the director’s undertaking to use his best endeavours to procure that the Company should comply with the GEM Listing Rules and to co-operate in investigations conducted by the Listing Division; and (iii) issued a public statement which involved criticism of, inter alia, the 3rd respondent for his breach of the aforesaid director’s undertaking. The GEM Listing Committee further concluded in its announcement that the breach by the 1st respondent was wilful and/or persistent and the retention of office by the 1st respondent was prejudicial to the interests of the investors. 53.In a nutshell, the materials before the court demonstrate an overwhelm case that each of the 1st and 3rd respondents as executive directors of the Company was collectively or individually responsible for the business or affairs of the Company having been conducted in a manner involving misfeasance or other misconduct towards it or its members or part of its members; resulting in its members or part of its members not having been given all the information with respect to its business or affairs that they might reasonably expect; or unfairly prejudicial to its members or part of its members. Disqualification Order 54.The Amended Petition is therefore proved against each of the 1st and 3rd respondents and a case for making a disqualification order against each of them is made out. 55.As to length of the disqualification order, in imposing the disqualification order on the 2nd respondent, Kwan J (as she then was) had pointed out that there are two important objectives in the exercise of the jurisdiction to make disqualification orders: firstly, protection of the public against the future conduct of persons whose past records as directors of listed companies have shown them to be a danger to those who have dealt with the companies, including creditors, shareholders, investors and consumers; and secondly, general deterrence in that the sentence must reflect the gravity of the conduct complained of so that members of the business community are given a clear message that if they break the trust reposed in them they will receive proper punishment: [2009] 2 HKC 19, 23 at para.12. 56.The disqualification order against the 2nd respondent is for a period of five years and the disqualification applies to all corporations. In the case of the 5th respondent, the scope of disqualification is limited to listed corporations and the disqualification period is six years. As noted above, the 2nd and 5th respondents consented to the making of a disqualification order against them and the Amended Petition was disposed of by way of the Carecraft procedure. 57.In the case of the 1st and 3rd respondents, Mr Chow SC submitted that the following matters are relevant in determining the disqualification period:
58.In my view, there is no justifying reason for limiting the scope of the disqualification order to be imposed on the 1st and 3rd respondents and the order should relate to all corporations. As to the disqualification period, it should be no less than five years, which is the period imposed on the 2nd respondent who did not contest the proceedings. Additionally, considering that the 1st respondent assumed the position of chairman of the board and in light of the conclusion and criticism made against him by the GEM Listing Committee in its announcement, a longer period of disqualification should be imposed on the 1st respondent. 59.Having regard to all the circumstances of the case, I am of the view that disqualification periods of seven years and six years should be imposed on the 1st and 3rd respondents respectively. Orders 60.Accordingly, I make the following orders:
Mr Anderson Chow SC instructed by the Securities and Futures Commission for the Petitioner. The 1st and 3rd respondents, unrepresented, absent. |
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