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Sino Bright Enterprises Co., Ltd v Fok Hei Yu And Another

Judgment Cited authorities 5 Cited in Precedent Map Related
Vincent
Judgment Date26 November 2014
Year2014
Judgement NumberHCA92/2014
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA92/2014 SINO BRIGHT ENTERPRISES CO., LTD v. FOK HEI YU AND ANOTHER

HCA 92/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 92 OF 2014

______________________

BETWEEN

SINO BRIGHT ENTERPRISES CO., LTD Plaintiff
and
FOK HEI YU 1st Defendant
FTI CONSULTING (HONG KONG) LIMITED 2nd Defendant

____________________
Before: Hon G Lam J in Chambers (Open to the public)
Date of Hearing: 26 November 2014
Date of Decision: 26 November 2014

_______________

D E C I S I O N

_______________

1. I have before me an application by summons to strike out the plaintiff’s Statement of Claim in these proceedings. The plaintiff is a sister company of The Grande Holdings Limited, a company incorporated in the Cayman Islands with its shares listed for trading on the Stock Exchange of Hong Kong. The plaintiff is a wholly-owned subsidiary of Accolade (PTC) Inc, which was also the controlling shareholder of Grande.

2. The 1st defendant is a certified public accountant in Hong Kong. The 2nd defendant is a company that carries on in Hong Kong the business of, inter alia, providing consultancy services on financial matters including corporate restructuring. The 1st defendant is the senior managing director of the 2nd defendant.

3. Mr Christopher Ho was the Chairman and still is a Director of Grande.

4. The writ endorsed with the Statement of Claim was issued on 15 January 2014 by the plaintiff against the two defendants. The Statement of Claim pleads that:

(1) The plaintiff was a major creditor of Grande, its sister company.

(2) In 2010, Grande was sued by certain claimants in the United States.

(3) As a result, in June to late 2010 the 1st defendant and Christopher Ho had a number of meetings in which the 1st defendant made certain representations and gave certain advice to Mr Ho.

(4) Thus, in paragraph 4.2 of the Statement of Claim it is pleaded that the 1st defendant represented and advised that:

“(1) Grande could be put into provisional liquidation and the trading of the shares of Grande on the HKSE would be suspended.

(2) In the case of a distressed company being suspended from trading on the HKSE (such as Grande), resumption of the trading of the shares of, say, Grande could be achieved through the following:-

(a) Subject to the requisite approval of shareholders and creditors, the underlying assets and liabilities of Grande be transferred to a private special project vehicle (‘SDV’).

(b) The listed shell of the company could then be transferred to a third party investor, who would inject cash into the company partly as its working capital; and partly as the incentive repayment to its creditors in return for their agreement to move their debt to the SPV.

(c) Upon the requisite approval of the shareholders and creditors, the HKSE would allow the resumption of the trading of the shares in the company in question, albeit that the investment by the third party investors would only involve cash alone without bringing in any operations.

(3) For the purpose of resumption of the trading of the shares in, say, Grande, the HKSE might require the restructure to have injection of some small business operations, which were not necessarily profit‑making.

(4) In such event, the third party investors could also arrange for some small business operations to be acquired by the relevant distressed company in order to satisfy the requirements imposed by the HKSE.”

(5) In paragraph 4.4 of the Statement of Claim it is pleaded that the 1st defendant further represented and advised that:

“(1) The 1st defendant himself was acquainted with a number of investors, who were interested in purchasing a ‘listed shell’ and would be prepared to inject cash as the investment into Grande for acquiring its listing status based upon the aforesaid restructuring plan. The details of the restructuring plan (such as the amount of investment by the third party investor) could be negotiated and worked out after putting Grande into provisional liquidation and the review of its financial information.

(2) If the proposed scheme became successful, any difficult creditors could be moved to the relevant SPV as its minority shareholders, such that their interruption to the relevant SPV or Grande could be minimise avoided.

(3) The plaintiff should be approached and convinced of petitioning winding up against Grande such that the 1st defendant and Roderick Sutton (‘Shutt on’), his colleague from the 2nd defendants [sic], could be appointed as the provisional liquidators of Grande given that the plaintiff was the major creditor of Grande and was associated with Grande’s major shareholder; hence would be more amenable to participating in the proposed plan to selvage Grande.

(4) Wilkinson & Grist (‘WKG’) (a firm with whom the 1st defendant then have already had business dealings) could be engaged to act for the plaintiff and that would enable the 1st defendant to work closely with W&G for the restructure of Grande. The 1st defendant would check the availability of W&G.

(5) Upon being appointed as the provisional liquidators of Grande, the 1st defendant and Sutton would review Grande’s financial information and work out the details of the plain for restructure and resumption of trading of the shares in Grande.”

(6) The defendants knew or ought to have known that the representations and advice would be relayed to and relied upon by the plaintiff.

(7) In late May 2011 at a meeting with Christopher Ho and one Paul Law, the 1st defendant repeated the above representations and advice to Paul Law who attended on behalf of the plaintiff and further represented to and advised the plaintiff that it could issue a statutory demand against Grande and could present a winding-up petition against if the statutory demand was not met.

(8) The 1st defendant intended and knew or ought to have known that the plaintiff would rely on the representations and advice and be induced thereby to nominate the 1st defendant and Mr Sutton as the provisional liquidators and to put Grande into provisional liquidation.

(9) The defendants, therefore,

“...at all material times owed to the Plaintiff a duty to exercise all reasonable care and skill in:

(1) advising the Plaintiff on whether the restructure plan for Grande based upon the Representations and Advice would be approved by the HKSE; and

(2) if not, advising the Plaintiff on any other feasible restructure plan for Grande, which would be approved by the HKSE”.

(10) Relying on the representations and advice, the plaintiff decided to put Grande into provisional liquidation, serve the statutory demand on Grande for repayment of its debts to the plaintiff, presented a winding‑up petition against Grande together with an application for the appointment of the 1st defendant and Mr Sutton as Grande’s provisional liquidators, and engaged W&G to prepare the requisite documentation.

(11) On 31 May 2011, the High Court did, on the plaintiff’s application, appoint the 1st defendant and Mr Sutton as provisional liquidators of Grande with power to pursue a corporate rescue.

(12) On 31 May 2012 and 13 March 2013 respectively, two successive proposals for the resumption of trading of shares were made by the provisional liquidators to the Listing Division of the Stock Exchange of Hong Kong for the purpose of the restructuring of Grande. These proposals were not accepted by the Stock Exchange and Grande has, since July 2013, been placed in the third delisting stage.

(13) The representations and advice were false in that on the basis of the representations and advice there was no prospect of such restructure plan being approved by the Stock Exchange.

(14) The 1st defendant made the representations and gave the advice knowing they were false or recklessly. Alternatively, the defendants acted negligently and in breach of their duty of care when the 1st defendant made the representations and advice to the plaintiff.

(15) It is also said that the defendants acted negligently and in breach of duty of care when the 1st defendant,

“as the Provisional Liquidator for Grande,...

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