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CHOI TAK LAN AND OTHERS v. NG WING HONG AND ANOTHER

Judgment Cited in Precedent Map Related
Vincent
Judgment Date17 July 2008
CourtHigh Court (Hong Kong)
Judgement NumberHCMP2672/2006
Subject MatterMiscellaneous Proceedings
HCMP002670A/2006 CHOI TAK LAN AND OTHERS v. NG WING HONG AND ANOTHER

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

CHOI TAK LAN 1st Plaintiff
HO KWOK KIT 2nd Plaintiff
NG WING HON 3rd Plaintiff
SUEN KIT YEE KITTY 4th Plaintiff
LEE YEUNG FAI 5th Plaintiff
and
NG WING HONG 1stDefendant
DATA WORLD TECHNOLOGY (CHINA) LIMITED 2nd Defendant

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

CHOI TAK LAN 1st Plaintiff
HO KWOK KIT 2nd Plaintiff
NG WING HON 3rd Plaintiff
SUEN KIT YEE KITTY 4th Plaintiff
LEE YEUNG FAI 5th Plaintiff
and
NG WING HONG 1stDefendant
NEXUS SOLUTIONS LIMITED 2nd Defendant

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

CHOI TAK LAN 1st Plaintiff
HO KWOK KIT 2nd Plaintiff
NG WING HON 3rd Plaintiff
SUEN KIT YEE KITTY 4th Plaintiff
LEE YEUNG FAI 5th Plaintiff
and
NG WING HONG 1stDefendant
DATA WORLD COMPUTER &
COMMUNICATION LIMITED		 2nd Defendant

(CONSOLIDATED BY THE ORDER OF
THE HONOURABLE MR JUSTICE BARMA DATED 1st MARCH 2007)

____________

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”):

1.1 Data World Computer & Communication Limited (“Data World” or “DWCC”);

1.2 Nexus Solutions Limited (“Nexus”); and

1.3 Data World Technology (China) Limited (“Data China” or “DWT”).

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:

Denny 18.98%
William 18.98%
Mdm Lee Kit Mui Kitty (William’s sister) 5.09%
Mdm Leung Yok Mui (KK’s mother) 18.98%
Mdm Tam Pik Chung (WH Ng’s mother) 18.98%
Ben Ng 18.98%

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:

Mdm Choi (Denny’s wife) 12.63%
Mdm Suen Kit Yee Kitty (“Mdm Suen”, the 4th Plaintiff and William’s wife) 15.42%
Mr Lee Yeung Fai (“YF Lee”, the 5th Plaintiff and William’s son) 3.39%
KK 15.42%
WH Ng 15.42%
Ben Ng 37.12%

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...

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