Cyberworks Audio Video Technology Ltd (In Compulsory Liquidation) v Silver Kent Technology Ltd

Court:High Court (Hong Kong)
Judgement Number:HCA2780/2006
Judgment Date:16 Apr 2020
Neutral Citation:[2020] HKCFI 398
HCA677D/2006 CYBERWORKS AUDIO VIDEO TECHNOLOGY LTD (In Compulsory Liquidation) v. MEI AH (HK) CO LTD

HCA 677/2006

[2020] HKCFI 398

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 677 OF 2006

________________________

BETWEEN
CYBERWORKS AUDIO VIDEO TECHNOLOGY LIMITED Plaintiff
(In Compulsory Liquidation)

and

MEI AH (HK) COMPANY LIMITED Defendant
AND BETWEEN
REMEDY ASIA LIMITED Plaintiff

and

PATRICK TONG HING CHI 1st Defendant
MEI AH ENTERTAINMENT GROUP LIMITED 2nd Defendant
MEI AH (HK) COMPANY LIMITED 3rd Defendant
SILVER KENT TECHNOLOGY LIMITED 4th Defendant
(By original writ and order to carry on)

AND

HCA 678/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 678 OF 2006

________________________

BETWEEN

CYBERWORKS AUDIO VIDEO TECHNOLOGY LIMITED Plaintiff
(In Compulsory Liquidation)

and

SILVER KENT TECHNOLOGY LIMITED Defendant
AND BETWEEN
REMEDY ASIA LIMITED Plaintiff

and

PATRICK TONG HING CHI 1st Defendant
MEI AH ENTERTAINMENT GROUP LIMITED 2nd Defendant
MEI AH (HK) COMPANY LIMITED 3rd Defendant
SILVER KENT TECHNOLOGY LIMITED 4th Defendant
(By original writ and order to carry on)

AND

HCA 2780/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2780 OF 2006

________________________

BETWEEN

CYBERWORKS AUDIO VIDEO TECHNOLOGY LIMITED Plaintiff
(In Compulsory Liquidation)

and

SILVER KENT TECHNOLOGY LIMITED Defendant
AND BETWEEN
REMEDY ASIA LIMITED Plaintiff

and

PATRICK TONG HING CHI 1st Defendant
MEI AH ENTERTAINMENT GROUP LIMITED 2nd Defendant
MEI AH (HK) COMPANY LIMITED 3rd Defendant
SILVER KENT TECHNOLOGY LIMITED 4th Defendant
(By original writ and order to carry on)

AND

HCA 658/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 658 OF 2011

________________________

BETWEEN

REMEDY ASIA LIMITED Plaintiff

and

PATRICK TONG HING CHI 1st Defendant
MEI AH ENTERTAINMENT GROUP LIMITED 2nd Defendant
MEI AH (HK) COMPANY LIMITED 3rd Defendant
SILVER KENT TECHNOLOGY LIMITED 4th Defendant
________________
(Consolidated by Order of Mr Registrar K.W. Lung dated 17 July 2014
and amended by Master A. Ho dated 28 February 2017)
Before: Hon Coleman J in Court
Dates of Hearing: 2-6, 9-11, 20 March 2020
Date of Judgment: 16 April 2020

_____________________

J U D G M E N T

_____________________

A. Introduction

1. In these four consolidated actions, three of the writs were issued in 2006 and one in 2011. But the events giving rise to the claims occurred as long ago as 1998 to 2002. The long and winding path to this trial nearly involved a further lengthy detour caused by the general adjournment of proceedings (the GAP, as it is called) as a response to the Covid-19 problem. Fortunately, with the cooperation of the parties, their legal representatives and Court staff (to all of whom I express my gratitude), directions were given at a telephone hearing – see [2020] HKCFI 347 – and the trial was able to go ahead, so as to be substantially completed within the originally fixed trial period.

2. The proceedings concern the operation of a company called Cyberworks Audio Video Technology Limited (“Company”), which prior to its winding up was engaged in the manufacture and replication of audio-visual products and was an optical disc manufacturer, with the benefit of various licensing and royalty agreements (together “Royalty Agreements”) made between it and Koninkijke Philips Electronics NV (“Philips”).

3. The Company was wound up on 15 January 2003 on insolvency grounds, on the petition brought by Philips based upon unpaid royalties owed to it by the Company. By Deed dated 10 September 2010, the current plaintiff, Remedy Asia Limited (“Remedy”) took an assignment of all “rights in, title to and interests in all causes of action” belonging to the Company.

4. The proceedings were brought originally by way of four separate actions. The various defendants (together “Defendants”) are:

(1) Patrick Tong Hing Chi (“Tong”);

(2) Mei Ah Entertainment Group Limited (“MAEGL”);

(3) Mei Ah (HK) Company Limited (“MAHK”); and

(4) Silver Kent Technology Limited (“Silver Kent”).

5. The four actions were consolidated, and the claims taken to trial are to be found in the consolidated statement of claim (“CSOC”). However, on certain aspects of the analysis it may be important as to which claims were commenced when, and in which actions. They are:

(1) HCA 677/2006: a claim against MAHK for the sum of $29,638,816, being consideration said to be due from MAHK under an agreement in writing dated 28 March 2000 (“MAHK Agreement”);

(2) HCA 678/2006: a claim against Silver Kent for the sum of $30,334,319, being the consideration said to be due from Silver Kent under an agreement in writing dated 1 April 2000 (“Silver Kent Agreement”);

(3) HCA 2780/2006: a claim against Silver Kent for the sum of $4,675,587.37, being a sum recorded as due from Silver Kent to the Company in the Company’s accounts as at 31 March 2002 (“Silver Kent Debt”); and

(4) HCA 658/2011: a claim against Tong and MAEGL, for fraudulent and dishonest breach of duties (as de jure, de facto and/or shadow directors) owed to the Company, alternatively in dishonest assistance of breach of duties/trust or in committing equitable fraud against the Company.

6. There is also a counterclaim by Silver Kent in the sum of $673,184.69, allegedly due from the Company broadly by reason of the overpayment of the Silver Kent Debt after 31 March 2002 (“Counterclaim”).

7. In the written opening submissions from Remedy, it was accepted that the parties’ forensic accounting experts agreed that the consideration for the MAHK Agreement and the Silver Kent Agreement had been settled by inter-company set-offs. Hence, Remedy said it would not be “pressing” its claims under those two agreements. In consequence, in their written opening submissions, the Defendants stated that the trial would no longer concern MAHK, as the only claim against it had been withdrawn. The Court was invited to enter judgment in favour of MAHK with costs, and also to enter judgment in favour of Silver Kent on the Silver Kent Agreement claim, also with costs. The precise orders to be made can conveniently be left to the conclusion of this Judgment. But it is worth pointing out at once that the circumstances surrounding the MAHK Agreement and the Silver Kent Agreement remained relevant on Remedy’s other claims.

8. All references in this Judgment to dollar sums are to sums denominated in Hong Kong Dollars, unless the context otherwise makes clear.

9. Remedy was represented at trial by Charles Manzoni SC, leading Norman Nip and Martin Lau. The Defendants were represented at trial by Rimsky Yuen SC, leading Jonathan Chang and Peter Dong.

B. The Parties, Witnesses and Others in the Narrative

10. The Company was incorporated on 28 November 1997, in its former name of Mei Ah Audio Video Technology Limited. The change to the new name occurred on 4 August 2000. It ceased business on 18 February 2002.

11. The Company’s de jure directors were: Tong (from 8 December 1997 to 28 July 2000); Li Kuo Hsing (“Li”) (from 8 December 1997 to 31 March 1999); Chan Kwok Sun, Dennis (“Dennis Chan”) (from 1 April 1999 to 28 July 2000); Li Kuo Lam (from 1 April 1999 to 28 July 2000); Ho Po Nin, Benny (“Ho”) (appointed 28 July 2000); and Cheng Wing Ming, Michael (appointed 28 July 2000). It can be seen that the Board of Directors of the Company was, at least ostensibly, wholly changed on 28 July 2000 by the resignation of all three directors and the appointment of two new directors. However, at all material times, at least half of the board of the Company consisted of directors and/or management of MAEGL.

12. As to the Company’s shareholders, MAEGL indirectly held 100% of the shares in the Company to 30 March 1998. Thereafter MAEGL indirectly held approximately 35% of the shares in the Company from 31 March 1998 to a date sometime before 31 March 2000, and approximately 45% between that date and until 15 January 2003 (the date of winding up).

13. The other 65% and 55% respectively was held by a company called Sino Regal Holdings Limited (“Sino Regal”). The circumstances as to the introduction of Sino Regal into the picture, and the change in its shareholding in the Company, may be something to be explored through the evidence. Sino Regal’s shareholders were Dennis Chan (30%) and Law Kwok Leung, Steve (“Law”) (70%). Both Dennis Chan and Law were until September 2000 part of the senior management of the MAEGL group, and from January 2001 onwards directors of M21 Technology Limited (“M21”).

14. M21 is a company listed on GEM on 30 January 2001. 29.25% of the shares in M21 were held indirectly by MAEGL from around 31 March 2001 until 7 May 2004, making MAEGL the second-largest beneficial shareholder during that period. Tong was managing director of M21 at all material times.

15. The financial controllers of MAEGL, namely Ken Lam and Wilson Lai, were the internal accounting staff for the Company and the contact persons for audits of the Company. The Company’s accounts were consolidated into the group accounts of the MAEGL group. The Company’s financial statements were audited first by PricewaterhouseCoopers (“PwC”) for the financial period from date of incorporation until 31 March...

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