Poon Ka Man Jason v. Cheng Wai Tao and Others

CACV 135/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 135 OF 2015

(ON APPEAL FROM HCA NO. 304 OF 2011)

________________________

BETWEEN

________________________

________________________

D E C I S I O N

________________________

Hon Cheung JA (giving Decision of the Court) :

1.The defendants apply for leave to appeal against our judgment of 21 January 2015. They argue that the following questions involve matters of great general or public importance :

1)   The intended appeal concerns the scope and ambit of the principle set out in Bell & Anor. v. Lever Brothers Ltd. & Ors. [1932] AC 161 at 193 to 196 and In Plus Group Ltd. v. Pyke [2002] 2 BCLC 201 paragraphs 72 to 75 (‘the Bell v. Lever principle’) and the interaction with the principle set out in in re Duomatic Ltd. [1969] 2 Ch. 365 at 373 and EIC Services Ltd. & Anor. v. Phipps & Ors. [2003] BCC 931 at paragraph 122 (‘the Duomatic principle’);

2)   In the circumstances as found by the trial Judge and adopted in paragraph 4.20 of the Court of Appeal Judgment, ‘the fact is that each restaurant is to be run by a separate corporate vehicle’, where a company was incorporated under this agreed modus operandi, it necessarily had no interest or concern in any further or other Itamae restaurant(s) and/or Itacho restaurant(s) under the Bell v. Lever principle, whether it is still necessary to prove the unanimous shareholders’ consent from the shareholders of Smart Wave for the operation of other Itamae or Itacho restaurants under the Duomatic principle, or whether the Bell v. Lever principle applied instead of the Duomatic principle (see paragraph 4.20 and paragraph 4.21 of Court of Appeal Judgment).

3)   In the context of a derivative action where the nominal representative (namely Jason) bringing the action on behalf of the company (namely, Smart Wave) has himself agreed to the modus operandi of one restaurant per company as the contractual basis for the company under the Bell v. Lever principle and, where there is no evidence that other shareholders have not agreed to the same, whether that representative in a derivative action can rely on the silence of the other shareholders to assert an inconsistent stance, whether this is sufficient to apply the Bell v Lever principle, or alternatively if this is sufficient for the Duomatic principle.

4)   In the context of a derivative action, where the nominal representative has agreed to the modus operandi of one restaurant per company, whether the company is entitled to rely on a contrary or inconsistent stance without the need to call such contrary evidence.

5)   In the context of a derivative action, where the counsel representing the company has put the company’s case on the basis that all the shareholders of the company has agreed to the modus operandi of one restaurant per company, whether the company can resile from the same and rely on a contrary or inconsistent stance not taken at the consolidated trial below.

6)   In the context of a derivative action, to what extent is the unclean hands of the only nominal representative relevant, and whether equitable relief should be granted to allow a person with unclean hands to benefit from his own wrong.

Our views

2.In our view these questions are not reasonably arguable.  The defendants are essentially repeating the same arguments they had advanced before us now under the guise of the first limb of section 22(1)(b) of the Court of Final Appeal Ordinance (Cap. 484).

First two questions

3.The first two questions concern the scope of the principles in Bell v. Lever Brothers and Duomatic.  The two principles are well established and the application of these principles is fact specific and contextual.

Third and fourth questions

4.These two questions are concerned with the consent of the shareholders in the derivative action.

5.The answer to these two questions must be fact specific and contextual in nature.

Fifth question

6.This question suggests that the question put by counsel in cross-examination can be treated as evidence in support of the defendants’ case.  This must be a fact specific and contextual issue.

Sixth question

7.This question deals with the application of the ‘unclean hands’ principle.  As the defendants have never pleaded such as a defence they are not entitled to raise this on appeal.  In any event, this must be another fact specific and contextual issue.

Conclusion

8.Accordingly the application is refused with costs to the plaintiff.

Written Submissions by Ms Linda Chan SC, instructed by T. H. Koo & Associates, for the plaintiff

Written Submissions by Ms Audrey Eu SC and Mr Jeremy Chan, instructed by Tang, Lai & Leung, for the 1^st defendant and 3^rd to 31^st defendants

Please refer to FAMV22/2015 for the relevant appeal(s) to the Court of Final Appeal.