Hotung Investment (China) Ltd v Ernst & Young (A Firm) And Others

CourtCourt of Final Appeal (Hong Kong)
Judgement NumberFAMV24/2013
Judgment Date23 Dec 2013
FAMV24/2013 HOTUNG INVESTMENT (CHINA) LTD v. ERNST & YOUNG (A FIRM) AND OTHERS

FAMV No. 24 of 2013

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 24 OF 2013 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM CACV NO. 271 OF 2011)

_____________________

Between:

HOTUNG INVESTMENT (CHINA) LIMITED Plaintiff (Applicant)
and
ERNST & YOUNG (A FIRM) 1st Defendant
(1st Respondent)
HILLHEAD LIMITED 2nd Defendant
(2nd Respondent)
HO YAU HOO RONALD 3rd Defendant
(3rd Respondent)

_____________________

Appeal Committee: Chief Justice Ma, Mr Justice Ribeiro PJ and Mr Justice Tang PJ
Date of Hearing and Determination: 16 December 2013
Date of Reasons for Determination: 23 December 2013

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REASONS FOR DETERMINATION

________________________________

Mr Justice Ribeiro PJ :

1. The Court of Appeal[1] ordered this action to be struck out, holding that even if it was otherwise viable, it was time-barred under the Limitation Ordinance.[2]

2. Mr Eric Edward Hotung (“EEH”) transferred 10,002 shares (representing a 50% interest) in Hotung Enterprises Limited (“HEL”) as well as three shares in the plaintiff company to the 2nd defendant (“Hillhead”) as trustee to hold the same on trust for EEH’s three daughters Mara, Sheridan and Gabrielle (together “the beneficiaries”). EEH created a mirror-image trust in favour of three sons including Sean Hotung. Hillhead is a service company owned and controlled by the 1st defendant (“E&Y”), the well-known firm of accountants. The 3rd defendant (“Ronald Ho”) was a partner in E&Y and a nephew of EEH.

3. HEL held 93.75% of the shares in the plaintiff and the plaintiff owned a plot of land in the New Territories (“the land”). Adjacent to it was another plot (“the adjacent plot”), twice its size, owned by Hotung Estates Ltd (“HEst”) which was wholly owned and controlled by EEH. On 28 December 1998, the plaintiff sold the land to HEst for $17.5 million. The plaintiff alleges that it was a sale at a gross undervalue since its book value was $23,857,308 and, when sold combined with the adjacent plot on 17 April 2000, realized $550 per sq ft or an attributable value of $67,546,902.50.

4. The plaintiff alleges that such sale was the product of a breach of fiduciary duty by two of the plaintiff’s directors, namely Joseph Gregory Hitselberger (“JGH”) and Song Fok Tek Frank (“SFT”). EEH, also a director of the plaintiff, declared his interest and did not vote at the board meeting. This action, however, does not involve any claim against JGH or SFT. It is brought against Ronald Ho, alleging that he is liable for rendering dishonest assistance to JGH and SFT in their breach of fiduciary duty. The other defendants are sued as vicariously liable for Ronald Ho’s conduct.

5. The plaintiff’s case is that Ronald Ho’s acts of dishonest assistance consisted of false representations made to the beneficiaries in a letter dated 29 April 1998, which he is alleged to have drafted, stating that HEL rather than HEst intended to acquire properties in the...

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