Shenzhen Honeycomb System Co Ltd v Hct Technologies (Hong Kong) Co Ltd

CourtCourt of First Instance (Hong Kong)
Judgment Date20 May 2020
Neutral Citation[2020] HKCFI 822
Subject MatterConstruction and Arbitration Proceedings
Judgement NumberHCCT20/2019
HCCT20/2019 SHENZHEN HONEYCOMB SYSTEM CO LTD v. HCT TECHNOLOGIES (HONG KONG) CO LTD

HCCT 20/2019

[2020] HKCFI 822

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 20 OF 2019

______________

IN THE MATTER of SECTION 92 OF THE ARBITRATION ORDINANCE (CAP 609)

and

IN THE MATTER OF ENFORCEMENT OF AN ARBITRATION AWARD DATED 20 JUNE 2017

______________

BETWEEN
SHENZHEN HONEYCOMB SYSTEM CO. LTD
(深圳市霍尼卡姆机电設备有限公司)
Applicant

and

HCT TECHNOLOGIES (HONG KONG) CO. LIMITED
(霍尼卡姆技術(香港)有限公司)
Respondent

______________

Before: Hon Mimmie Chan J in Chambers (open to public)

Date of Hearing: 21 January 2020

Date of Decision: 20 May 2020

______________

D E C I S I O N

______________

Background

1. On 27 March 2019, the Applicant (“SHS”) commenced these proceedings and applied for leave to enforce an arbitral award (“Award”) made in arbitration proceedings which had been commenced by SHS against the Respondent (“HCT”) on the Mainland, pursuant to an arbitration clause contained in an agreement between SHS and HCT for the sale of products (“Agreement”). The Award was for HCT’s payment to SHS of US$2,295,496.75, interest and costs. This was after the leave granted by the Court, to enforce the Award in separate proceedings between SHS and HCT (“HCCT 47/17”), was set aside on 9 August 2018 on the ground of material non-disclosure on the part of SHS in its ex parte application. Pursuant to Order 73 rule 10 (1) (e) RHC, and in view of the issues which had been raised in HCCT 47/17, the Court in these proceedings directed SHS on 2 April 2019 to issue a summons for the leave now sought, to enforce the Award.

2. On 14 May 2019, SHS issued the inter-partes summons, as directed. The application for leave to enforce the Award is opposed by HCT, on the ground that these proceedings have not been commenced with due authority on the part of SHS, and that the action should be struck out and dismissed.

3. SHS is a Mainland company, the shares of which are held by Mr Jin Zhe (“Jin”) (and his nominees) as to 45.3%, with the remaining 53.7% being held collectively by Qu Zeyang (“Q”), Wang Guiying (“W”) and He Tingzhou (“H”). It is not disputed in these proceedings that Jin, Q and H are currently the 3 registered directors of SHS, with Jin being the Chairman of the board of directors.

4. There is dispute between Jin on the one side and Q, H and W on the other side, as to whether Jin had been removed as a director at a shareholders’ meeting of SHS purportedly held on 23 August 2017 (“Shareholders Meeting”). After Jin’s purported removal as a director, a directors’ meeting was held on 4 September 2017 by Q, H and W (“Board Meeting”), whereby Jin was removed as the Legal Representative of SHS, as registered in the records of the relevant statutory authority on the Mainland (“Registry”), and Q was appointed in his place.

5. On 10 April 2018, the Shenzhen Bao’an District People’s Court ruled that the resolutions passed at the Shareholders Meeting and the Board Meeting were lawful and valid, such that Jin had been removed as a director and as the Legal Representative of SHS (“Judgment”). On appeal, the Shenzhen Intermediate People’s Court overturned the Judgment on 25 December 2018, ruling instead that the Shareholders Meeting had not been validly convened and held, and that the resolutions passed at the Shareholders Meeting and the Board Meeting were invalid, or of no effect and should be set aside (撤銷) (“Appeal Judgment”).

6. Jin maintains that by virtue of the Appeal Judgment, he remains a director and the registered Legal Representatives of SHS, and had the authority to instruct solicitors to commence these proceedings in the name of SHS.

7. On the part of Q, H and W, they applied for retrial of the Appeal, which application was rejected by the Guangdong Higher People’s Court on 30 July 2019. They further applied to the Shenzhen People’s Procuratorate for supervision of the Appeal Judgment (“Supervision Proceedings”), and on 21 October 2019, the application was accepted. Q, H and W claim therefore that the Appeal Judgment on the invalidity of the subject resolutions (and hence the validity of Jin’s position as director and Legal Representative) is not final or conclusive, as enforcement of the Appeal Judgment would be suspended if the Appeal Judgment is found to be erroneous.

8. It is not alleged by Q, H and W that before a decision is made in the Supervision Proceedings, the Appeal Judgment is of no effect, or that there is an interim stay of the Appeal Judgment. Their experts agreed that there is no such stay. Q, H and W accept for the purposes of these proceedings that as at the date of the hearing of the summons, Jin is a director and the chairman of SHS and remains registered as its Legal Representative.

9. In gist, HCT claims that Jin had no authority to commence these proceedings to seek leave to enforce the Award, in reliance on his status as the registered Legal Representative, when in fact the directors and shareholders had not authorized Jin to make claims on behalf of SHS. They argued, on the basis of Kammy Town Ltd v Super Glory Corporation Ltd, HCA 3524/2003, unreported, 14 January 2005 that since the point of lack of authority must be taken at the earliest opportunity, the Court should strike out SHS’s claims in these proceedings for leave to enforce the Award in their entirety.

10. On behalf of HCT, it was emphasized that the burden is on those suing in the name of a plaintiff to prove authorization, such that in this case, Jin has to prove, on a balance of probabilities, that he had the authority to commence these proceedings against HCT. This, it was argued, Jin has failed to do, when Q, who is one of the directors of HCT and also a shareholder of SHS, has filed affirmations to claim that Q, H and W as shareholders of SHS, and Q and H as directors of SHS, had never agreed to appoint the solicitors to initiate and proceed with these proceedings on behalf of SHS. Q claims that these proceedings were accordingly against the intention of the majority of the board of directors and majority of the shareholders of SHS.

11. HCT claims that notwithstanding the challenges it made, and the challenge by Q on behalf of himself, H and W as shareholders and directors of SHS, Jin and SHS as Applicant initiating these proceedings failed to produce any evidence of Jin’s authorisation to instruct the solicitors and to commence these proceedings in the name of SHS - whether by production of a resolution passed at a meeting of the directors, or otherwise. The only assertion maintained is the record at the Registry of Jin’s registration as the Legal Representative of SHS.

12. On behalf of SHS, Counsel accepted that SHS has the burden to prove that these proceedings were commenced with the proper authority. However, it was argued that under Mainland law, Jin as the registered Legal Representative has the power and authority to act on behalf of SHS and to commence these proceedings on behalf of SHS. Counsel argued that there is no authority to support the claim made by Q, H and W that as majority shareholders, they can control the action of the Legal Representative and override the wishes and decisions of the Legal...

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1 cases
  • Shenzhen Honeycomb System Co Ltd v Hct Technologies (Hong Kong) Co., Ltd
    • Hong Kong
    • Court of First Instance (Hong Kong)
    • 15 Diciembre 2020
    ...award (“Award”) against HCT. The stay application is premised upon HCT’s appeal against a Decision of Mimi Chan J dated 20 May 2020 ([2020] HKCFI 822) (“Decision”) whereby HCT’s challenge to the Enforcement Summons on the ground that the proceedings were not brought with authority of SHS wa......

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