Luk Pak Chuen v. Luk Pak Shing and Others

HCCW 116/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 116 OF 2012

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BETWEEN

HCCW 117/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 117 OF 2012

____________________

____________________

BETWEEN

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D E C I S I O N

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1.I have before me summonses issued on 28 January 2013 by the 1st respondent for orders that the petitions be struck out, alternatively consolidated with HCAP 5/2012.

2.At the hearing before me today, the petitioner was represented by Mr Patrick Chong.  The 1st respondent was represented by Mr Russell Coleman SC, and Miss Frances Lok. 

3.The amended petitions, which were issued in September 2012, seek orders pursuant to section 168A(2)(a) of the Companies Ordinance, Cap 32, alternatively a winding-up order pursuant to section 177(1)(f) of the ordinance.  However, in the petitioner’s skeleton argument, it is made clear that the relief for a winding-up order is not pursued. 

4.The petitioner acquired shares, he asserts, in or about 2004 in the companies from his father on his father’s retirement.  At the same time, his father also transferred shares to his other children.

5.The complaints of unfair prejudicial acts by the 1st and 5th respondents are succinct and set out in paragraphs 17 and 18 of the amended petitions, which read as follows:

“17. Since Mr. Luk Pak Chuen became a shareholder in the Company and the China Company, Mr. Luk Pak Chuen never received:-

(1) Any notice of any annual general meetings or shareholders’ meetings.

(2) Any financial documents, copy of the Company’s balance sheets, directors’ reports or auditors’ reports.

(3) Any dividend payments.

18.  Further, despite repeated requests and demands from Mr. Luk Pak Chuen, the Company and Mr. Luk Pak Shing have failed and / or refused to disclose any information about the affairs of the Company.”

6.As well as disputing the complaints of unfairly prejudicial acts, the respondents have taken a point concerning the locus of the petitioner to present the petitions. 

7.In short, they say, that when shares were transferred to him in 2004, and there appears to be no dispute that such a transfer did take place, it was on the express basis that the petitioner held those shares on trust for his father.

8.The ground upon which an order for the striking out of the petitions was initially advanced, was that as a consequence the petitioner did not have locus to present the petitions.  In my view, that is not an accurate way of characterising the issue which the respondents have identified. There appears to be no dispute that the petitioner is a member of the company and, therefore, comes within section 168A.  The live issue is whether or not he is the beneficial owner of the shares that were transferred to him by his father. 

9.In my view, given the parties’ pleaded cases, and the evidence filed to date both in the petitions before me and the probate action I referred to later, there is not, presently, a basis for striking out the proceedings.  The live issue is this.  The court generally takes the position that issues of ownership of shares should be resolved before a petition is allowed to proceed, and such issues should be resolved in separate discrete legal proceedings: see, for example, Re Bambi Restaurants Ltd [1965] 2 All ER 79; Cheung Donald Quintin v Wang Teh Huei And Ors [1985] 1 HKC 403.

10.The probate action was commenced by the 1st to 4th respondents in August 2012 challenging letters of administration of the father’s estate granted to the petitioner on or about 6 December 2011.  In those proceedings, a central issue, say the respondents, is the question of beneficial ownership of the shares in the companies held by the petitioner.  The probate action, say the respondents, is the natural and convenient legal proceedings in which that issue should be determined. 

11.Mr Coleman submitted that the petitions before me should be stayed until the probate action, and within it the question of beneficial ownership of the shares, has been determined.  The alternative relief sought in the summonses (which the petitioner now also advocates) is a consolidation of the two sets of proceedings.   

12.In my view, it is desirable and appropriate that the issue of beneficial ownership is determined first, and the probate action is an appropriate and convenient action in which to do so.  My reasons are these.

(1) The complaints in the petitions are such that if the probate action determines that the petitioner is the beneficial owner of the shares, in practice, it seems likely that that will result in the determination of the unfair prejudice complaints. 

(2) If in the probate action it is determined that the petitioner is not the beneficial owner of the shares, on its face it would seem to follow that the unfair prejudice petitions will necessarily fail.

13.Mr Chong argued that although not currently pleaded, there is another case available to the petitioner which would involve advancing, essentially, the same unfair prejudice complaints based on the petitioner having locus because of his interest in his mother’s estate which includes shares in the companies. 

14.However, it seems to me that this new complaint would give rise to new and complicated factual issues which make consolidation less rather than more desirable. 

15.I, therefore, make an order staying the present petitions until the handing down of the judgment in the probate action.  I will give the parties general liberty to apply. 

(Discussion re costs)

16.I will make a costs order in favour of the respondents without certificate for counsel.

Mr Patrick Chong, instructed by Au & Associates, for the petitioner (in both actions)

Mr Russell Coleman SC and Ms Frances Lok, instructed by Paul K C Chan & Partners, for the 1st respondent (in both actions)