Temple Chambers’ Post

The Hon. Geoffrey Ma, GBM has been appointed as Honorary Advisor of the Hong Kong Judicial Institute, effective from 15 July 2024. The Hon. Geoffrey Ma is the former Chief Justice of the Hong Kong Court of Final Appeal. Prior to joining the Hong Kong Judiciary, he was in private practice as a barrister at Temple Chambers. He was Head of Chambers before joining the bench in 2001. He served as the Chief Justice of the Court of Final Appeal from 2010 to 2021. He has since returned to Temple Chambers as an arbitrator member.   As Honorary Advisor, the Hon. Geoffrey Ma will provide judicial training and advice at the invitation of the Hong Kong Judicial Institute.

Two to tango? Court of Appeal considers whether #declaration of non-liability in arbitral award should be set aside due to lack of “dispute”   In CMBICDHAW Investments Limited v CDH Fund V Limited Partnership & Ors [2024] HKCA 516, the plaintiff had commenced a High Court action (“HCA”) against individuals who were agents of the 1st and 2nd defendants, alleging that two individuals had by fraudulent misrepresentation induced the plaintiff to enter into a co-investment agreement (“Agreement”) with the 1st and 2nd defendants. The Agreement contained an arbitration clause. The 1st and 2nd defendants (together with another corporate entity, and the two individuals) commenced arbitration proceedings against the plaintiff, seeking inter alia a declaration of non-liability in respect of the allegations made in the HCA.   The Court of Appeal had to determine de novo whether, in the above circumstances, there existed a “dispute” between the contracting parties, falling within the scope of the arbitration clause, such as to engage the arbitrator’s jurisdiction.   Coleman J, giving the Judgment of the Court, reviewed the relevant principles in determining this issue. He noted that in the #arbitration context, the term “dispute” should be construed inclusively and not overly legalistically. It is unnecessary for there to be a “claim” in the sense of a legal claim / cause of action, as long as there was an assertion by one party which was not accepted by the other. The time for determining when a “dispute” has arisen is at the commencement of the arbitration.    While the Court did not rule out the possibility that there could be a “dispute” even where non-contractual claims or assertions are made against a third party who is a stranger to the arbitration agreement, each case would turn on its own facts. On the circumstances of the present case, where the plaintiff had not made claims or assertions of wrongdoing against the 1st and 2nd defendants, the Court held that there was no relevant “dispute” to engage arbitral jurisdiction.   The full judgment can be viewed here: https://shorturl.at/OTYsf   Benjamin Yu SC, Sara Tong SC and Keith Chan, instructed by Guantao and Chow Solicitors and Notaries, acted for the Defendants.

Eva Sit SC was invited to moderate the panel titled “The #future of the Chinese real estate market” on 4 July 2024 at GRR Live: Restructuring in #Asia annual conference. The panel’s speakers Jocelyn Chi, Ronald Thompson and Viola Jing discussed the status of ongoing cases such as #Evergrande and Aoyuan Group, key developments from PRC, Hong Kong, and offshore courts, and predictions for the next year. The GRR Live: Restructuring in Asia annual conference focuses on topical issues within the Hong Kong #restructuring and #insolvency sphere and further abroad. We thank the organiser for the invitation, and we look forward to seeing our friends and partners in the industry again soon. #Event #China #Realestate #TempleChambers  

#UK limited liability partnership does not have “issued share capital” for the purpose of claiming stamp duty relief In John Wiley & Sons UK2 LLP v Collector of Stamp Revenue [2024] HKCA 578, the Court of Appeal allowed the #Collector of Stamp Revenue’s appeal. The CA held that a UK limited liability partnership has no “issued share capital”, such that the transaction in question was not entitled to stamp duty relief under s.45(2) of the Stamp Duty Ordinance (Cap 117) (“SDO”). This is the first case in Hong Kong to consider s.45 relief. The #transaction involved the transfer of the entire issued share capital of John Wiley & Sons (HK) Limited (“HKCo”) by John Wiley & Sons UK2 LLP (“LLP 2”), a UK limited liability partnership, to Wiley International LLC (“HoldCo”). HoldCo owns 100% indirect beneficial interest in LLP2. Under s.45(2) SDO, the transaction is entitled to stamp duty relief if the transfer is made between associated bodies corporate, namely that one is beneficial owner of not less than 90% of the “issued share capital” of the other. There is no #dispute that a limited liability partnership does not have “share capital” or “issued share capital”. The Collector assessed that the transaction was not entitled to stamp duty relief because LLP2 does not have “issued share capital”. HoldCo and LLP2, as duty-payers, appealed to the District Court, which handed down judgment in their favour. The Collector appealed to the CA, which allowed the appeal. The CA agreed with the Collector that the term “issued share capital” has a well-established meaning in company #law, which should be adopted when construing a tax statute, in the absence of any contrary indication. “Issued share capital” means the total monetary value of the consideration paid or agreed to be paid by the shareholders in return for shares of a company as have been issued. The CA expressly rejected the duty-payers’ submission that “share capital” in s.45 refers to “a class of participation interest”, as that is vague and uncertain, and finds no support from the historical context or language of s.45. Moreover, the Court found that even though the current SDO has adopted the term “body corporate” in place of “company”, which was used in the old Stamp Ordinance, it remained the legislative intention for s.45 relief to be available only to associated companies which satisfy the 90% issued share capital association requirement. Hence, even though a limited liability partnership is a body corporate, it is not a “company”. Further, as limited liability partnerships do not issue shares to their members, the capital paid by their members cannot be regarded as “issued share capital” under s.45. The s.45 stamp duty relief is therefore not available for the transaction. The full judgment can be viewed here: t.ly/1TaNz Eugene Fung SC and Elizabeth Cheung, instructed by the Department of Justice, for the Collector of Stamp Revenue. #Stampduty #Firstcase #TempleChambers

Turtle jellies: Court of Appeal dismisses Hoi Tin Tong's appeal in long-running dispute In Hoi Tin Tong Co Ltd v Choy Kwok Keung [2024] HKCA 582, the plaintiff appealed against the decision of Lok J dismissing its claim against the defendant for defamation, malicious falsehood and conspiracy to injure. The plaintiff is a producer and seller of turtle jellies (龜苓膏) and the defendant was previously associated with the plaintiff’s Mainland operations. The defendant, an Apple Daily reporter, and an employee of the plaintiff met in one of the plaintiff’s shops, where the reporter secretly taped the employee demonstrating how to wash off mould from turtle jellies. These videos were uploaded on #YouTube, and articles detailing malpractices by the plaintiff were published in local #newspapers. At first instance, Lok J found that the defence of justification was made out, in that the plaintiff’s management either instructed its staff to adopt the malpractices or at least had encouraged or condoned its staff to do so. Lok J also found that there was no evidence of an agreement between the defendant, the reporter and the employee to injure the plaintiff. On appeal, the plaintiff argued that Lok J erred in upholding the defence of justification based on unpleaded points, namely that the staff were required to assess the seriousness of the mould. Moreover, the plaintiff argued that Lok J erred in holding that the plaintiff’s claim for conspiracy cannot succeed if the malpractices were true. The Court of Appeal dismissed the plaintiff’s appeal. First, the Court of Appeal held that Lok J had decided that the defendant succeeded on the plea of justification within the parameters of the parties’ pleadings. The plaintiff’s case was not that the sting of defamation concerned the seriousness of the mould, and so the reference to the seriousness of the mould was irrelevant for the plea of justification to succeed. Second, the Court of Appeal upheld Lok J’s finding that the demonstrations were not staged and that the malpractices were true. Lok J’s finding that the reporter and the employee were not involved in the conspiracy was sound, and the plaintiff had failed to prove otherwise. The Court of Appeal agreed with the plaintiff that, as a matter of legal proposition, even if the malpractice is substantially true, the defendant would be liable for conspiracy if he had combined with the reporter and employee with a predominant intention to injure the plaintiff. Lok J’s rejection of the plaintiff’s submission below should thus not be treated as stating a proposition of law. The full judgment can be viewed here: https://lnkd.in/gi6eA_fe Bernard Man SC, instructed by Tang & Co., for the Plaintiff. Victor Dawes SC, instructed by H. M. Tsang & Co., for the Defendant. #HongKong #Judgment #TempleChambers #Turtlejellies #Law

Court winds up listed company at first hearing In Re Dexin China Holdings Company Limited [2024] HKCFI 1610, the Court of First Instance made a winding up order against the company, which was incorporated in the #Cayman Islands and listed on the Main Board of the Hong Kong Stock Exchange, at the first hearing of the petition before judge. The petition debt arose from certain senior notes issued by the company in 2020. The notes, until their maturity in December 2022, were listed on #HKEx. Since the company failed to make payment of the principal and accrued interest pursuant to the notes, the petitioner (as trustee for itself and noteholders) served a statutory demand in the sum of USD 410 million on the company. The statutory demand went unmet, culminating in the presentation of the petition. Linda Chan J found that there was no evidence in opposition to the petition. The affidavit purportedly filed by the company was late, in breach of rule 32(1) of the Companies (Winding-up) Rules (Cap 32H). The company did not issue any summons to apply for extension of time. Nor did the company provide any satisfactory explanation for the delay or have the means to pay the petition debt. Accordingly, the Court refused to grant conditional leave for the company to file its evidence out of time. Linda Chan J also concluded that even if (contrary to her view) there was proper basis for the court to grant leave for the company’s affidavit, the grounds raised by the company had no merit. In particular, the judge rejected the company’s contention that the second core requirement for the court to exercise the discretionary jurisdiction to wind up a foreign company under s.327(3) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) is not met, observing (among other matters): -         As the company was a listed company, the leverage or commercial pressure created by the petition itself constitutes a sufficient benefit to the petitioner. -         The company carried out substantial fund-raising activities in Hong Kong including issuing the notes in Hong Kong which were listed on HKEx. -         There is a reasonable possibility of benefit that the #liquidators appointed in Hong Kong will be able to seek recognition and assistance from the Mainland courts under the “Mutual Recognition of and Assistance to Bankruptcy (Insolvency) Proceedings between the Courts of the Mainland and of the Hong Kong Special Administrative Region”. The full judgment can be viewed here: https://lnkd.in/gJbR3pQH. Queenie Lau SC and Thomas Wong were instructed by and acted for the petitioner.    

Court discusses principles of de facto directorship in a claim brought by special purpose vehicle of a parent company   In Shown Wai Investment Company Limited v Hui Yip Wing David [2024] HKCFI 1477, the Plaintiff (“SW”) instigated claims against the Defendant (“Hui”), who was both a director of SW’s parent company, Chime Corporation Limited (“Chime”), and a general manager of the Chinachem Group (“Group”). Hui had introduced to the Group a potential investment in a #PRC real estate #development project, which he negotiated on its behalf. Eventually, the Board of Chime passed a resolution to agree to the proposed investment through its wholly-owned subsidiary, and SW was thereafter appointed as the special purpose vehicle through which the Group was to enter into the transaction. The sale and purchase agreement was signed on 12 December 2009, but Hui was only formally appointed as a director of SW on 28 December 2009.   SW’s claim is that Hui was its de facto director at all material times prior to his formal appointment, and he acted in breach of his fiduciary duties and the duty to exercise reasonable care, skill and diligence in procuring SW to enter into the transaction. In any event, Hui had also breached his duties as de jure director after 28 December 2009 by failing to prevent SW’s completion of the transaction.   The Court dismissed SW’s claims. On the issue of de facto directorship, SW argued that Hui had assumed directorial duties and responsibilities vis-a-vis SW by playing the dominant and leading role in the negotiation of the transaction which was to be entered into by an SPV (which ended up being SW), and he individually drove the resolution of the Chime Board which was required as part of the Group’s corporate governance structure to approve the transaction. His role and responsibilities were at least equivalent to (if not greater than) those of a director of SW. The Court examined the applicable principles on de facto directorship and reiterated the need to plead and prove functions which are only referable to de facto directorship and not to any other capacity. As both Chime and SW had their own properly functioning boards, Hui could not be said to have individually assumed any responsibility to SW, and the Court distinguished two recent English cases cited by SW in which the director of the parent company was found to be a de facto director of the subsidiary. As to the period after Hui became a de jure director of SW, the Court found that there was no evidence that the directors of Chime or SW would have agreed to exiting the transaction and confining SW’s loss to the deposit paid.   The full judgment can be viewed here: https://lnkd.in/gtm_xhAz   Sara Tong SC, leading Esther Mak and Eugene Kwan, instructed by Gibson Dunn, acted for the Plaintiff. Bernard Man SC, leading Vincent Chen and Ian Yu, instructed by Lam & Co., acted for the Defendant. #Realestate

Judicial appointment Her Honour Judge Winnie Tsui Wan-wah, a former member of Temple Chambers, has been appointed a Judge of the Court of First Instance of the High Court, with effect from 3 July 2024.

Court grants worldwide Mareva and notification injunctions in s.214 SFO proceedings In SFC v Leung Anita Fung Yee Maria & Ors [2024] HKCFI 1210, the Court of First Instance granted worldwide Mareva and notification injunctions (“Injunctions”) against the 1st respondent (R1) in favour of the SFC in proceedings commenced under s.214 of the Securities and Futures Ordinance (Cap. 571) (“SFO”). This is a notable case because it is the first time that the #SFC has obtained injunction orders of this kind in an ongoing legal action under s.214 SFO proceedings, and signifies the possibility of similar relief being granted in future cases in appropriate circumstances.     Together with her late husband Wong Yu Hong, Philip (黃宜弘) (R2), R1 held a number of senior management positions in SMI Culture and Travel Group Holdings Limited (R4), a company previously listed on the Hong Kong Stock Exchange. It is the SFC’s case that R1 and R2 had implemented an elaborate scheme to misappropriate substantial assets from R4, in the range of HK$32.5M to HK$74.27M, via BVI entities that were ultimately controlled by R1 and R2 (“Scheme”). The SFC took urgent action after a former employee of R4 (“Informant”) revealed (inter alia) that (i) R1 was seeking to concurrently dispose of her properties in Hong Kong, Shanghai, and Canada (“Properties”) and relocate to Canada and (ii) R1 had threatened the Informant and her daughter if the Informant “betrayed” (出賣) her, as evidenced by a series of “WeChat Messages” purportedly sent by R1 between August and September 2023. DHCJ Jonathan Wong granted the Injunctions against R1. In particular, the judge found there was a real risk of dissipation by R1, bearing in mind (amongst other things): ·        the nature of the claims against R1 which was based on fraud and dishonesty (referring to Convoy Collateral Ltd [2020] 6 HKC 81, [2020] HKCA 537); ·        the terms of the two SPAs in relation to the Shanghai and Canadian Properties (which R1 had disclosed pursuant to the notification injunction) were highly unusual especially with regards to the timing of their execution, which was shortly after the Informant first approached the SFC close to when the WeChat Messages were sent; and ·        despite R1’s challenge to the authenticity of the #WeChat Messages, the judge found that it was more likely than not that the WeChat Messages had not been fabricated in the circumstances. The full judgment can be viewed here: https://lnkd.in/gtnpeg4p Jin Pao SC and Sheena Wong were instructed by and acted for the SFC (the Petitioner). Bernard Man SC also acted for the SFC at an earlier stage of the proceedings.