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Success House Industries Ltd And Others v Liao Chen Toh

Judgment Cited authorities 12 Cited in Precedent Map Related
Vincent
Judgment Date04 September 2020
Neutral Citation[2020] HKCFI 2272
Judgement NumberHCMP1532/2019
Subject MatterMiscellaneous Proceedings
CourtCourt of First Instance (Hong Kong)
HCA2302B/2014 LIAO CHEN TOH v. LOYAL INTERNATIONAL ENTERPRISES CO LTD AND OTHERS

HCA 2302/2014 & HCMP 1532/2019

[2020] HKCFI 2272

HCA 2302/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2302 OF 2014

________________________

BETWEEN
LIAO CHEN TOH Plaintiff

and
LOYAL INTERNATIONAL ENTERPRISES CO. LTD. 1st Defendant
SUCCESS HOUSE INDUSTRIES LIMITED 2nd Defendant
NEW SUCCESS HOUSE INDUSTRIES LIMITED 3rd Defendant
LOYAL INVESTMENT LIMITED 4th Defendant
(by original action)

________________________

BETWEEN
SUCCESS HOUSE INDUSTRIES LIMITED 1st Plaintiff
NEW SUCCESS HOUSE INDUSTRIES LIMITED 2nd Plaintiff
LOYAL INVESTMENT LIMITED 3rd Plaintiff

and
LIAO CHEN TOH 1st Defendant
SILVER STATE ENTERPRISE LIMITED 2nd Defendant
LOYAL INTERNATIONAL TRADING CO. LTD. 3rd Defendant
(見龍國際貿易有限公司)
LOYAL (HK) INTERNATIONAL LIMITED 4th Defendant
見龍投資有限公司 5th Defendant
ASTOR GROUP LIMITED (FORMERLY KNOWN AS 6th Defendant
LOYAL GROUP TRADING CO., LTD.)
TAYISHA INVESTMENT LTD. 7th Defendant
VICEROY INVESTMENT LTD. 8th Defendant
(by counterclaim)

________________________

BETWEEN
LIAO CHEN TOH Plaintiff

and
LOYAL INTERNATIONAL ENTERPRISES CO. LTD. 1st Defendant
SUCCESS HOUSE INDUSTRIES LIMITED 2nd Defendant
NEW SUCCESS HOUSE INDUSTRIES LIMITED 3rd Defendant
LOYAL INVESTMENT LIMITED 4th Defendant
JIANGYIN XIN-HE-QIAO CHEMICAL CO., LTD 5th Defendant
(江陰新和橋化工有限公司 )
NINGBO XIN QIAO CHEMICAL INDUSTRIAL CO., LTD 6th Defendant
(寧波新橋(和橋)化工有限公司)
NINGBO XIN-LONG-XIN CHEMICAL CO., LTD. 7th Defendant
(寧波新龍欣化學有限公司)
JIANGYIN LONG-CHI PACKING MATERIAL CO., LTD 8th Defendant
(江陰龍奇包裝材料有限公司)
DONGGUAN XIN-CHANG-QIAO PLASTICS CO., LTD 9th Defendant
(東莞新長橋塑料有限公司)
JIANGYIN XIN SHU ENGINEERING PLASTICS CO., LTD 10th Defendant
(江陰新樹工程塑料有限公司)
TIANJIN XIN LONG QIAO ENGINEERING PLASTICS 11th Defendant
CO., LTD (天津新龍橋工程塑料有限公司)
NINGBO CHANG-QIAO ENGINEERING PLASTICS CO., LTD (寧波長橋工程塑料有限公司) 12th Defendant
XINJIANG LONG-QIAO ENGINEERING PLASTICS CO., 13th Defendant
LTD (新彊龍橋工程塑料有限公司)
PANJIN LONG-GUANG ENGINEERING PLASTICS CO., 14th Defendant
LTD (盤錦龍光工程塑料有限公司)
LOYAL (TIANJIN) INTERNATIONAL TRADING CO., 15th Defendant
LTD (見龍(天津)國際貿易有限公司)
(by counterclaim to counterclaim)

________________________

HCMP 1532/2019

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1532 OF 2019

________________________

IN THE MATTER of an application on behalf of Success House Industries Limited, New Success House Industries Limited and Loyal Investment Limited against Liao Chen Toh for an Order of Committal
and
IN THE MATTER of Order 52 Rules 1 & 3 of the Rules of the High Court

________________________

BETWEEN
SUCCESS HOUSE INDUSTRIES LIMITED 1st Plaintiff
NEW SUCCESS HOUSE INDUSTRIES LIMITED 2nd Plaintiff
LOYAL INVESTMENT LIMITED 3rd Plaintiff

and
LIAO CHEN TOH Defendant
________________________
(Dealt with together)
Before: Deputy High Court Judge MK Liu in Chambers (Paper Disposal)
Dates of Submissions of Plaintiff by Original action and 1st Defendant by Counterclaim in HCA 2302/2014 and Defendant in HCMP 1532/2019: 18, 20 & 27 August 2020
Dates of Submissions of 2nd – 4th Defendants by Original action and 1st – 3rd Plaintiffs by Counterclaim in HCA 2302/2014 and 1st – 3rd Plaintiffs in HCMP 1532/2019: 18, 20 & 25 August 2020
Date of Decision: 4 September 2020

________________________

DECISION

________________________

1. The following summonses are before me:

(1) LCT[1]’s summonses dated 3 December 2019 (“LCT’s Summonses”) filed in HCA 2302/2014 (“the Action”) and HCMP 1532/2019 (“the Contempt Proceedings”), for inter alia setting aside the ex parte Order made by me on 10 September 2019 (“the Ex Parte Order”), and dismissing the Contempt Proceedings against LCT; and

(2) Ps[2]’ summons dated 24 December 2019 (“Ps’ Summons”) filed in the Contempt Proceedings for leave to issue and serve the notice of entering the originating summons therein for hearing (“the Notice of Hearing”) on LCT out of time.

2. I have directed that the said summonses be determined on paper without an oral hearing. Mr Anson Wong SC (leading Mr Martin Kok) for LCT and Mr William Wong SC (leading Mr Justin Lam) for Ps have provided me detailed written submissions, and I am grateful for that.

Background

3. The background facts set out in the paragraphs below are taken from Ps’ written submissions. These matters do not appear to be disputed by LCT.

4. The factual background of the litigation has been succinctly summarized by Lok J in his reasons for decision dated 30 March 2016, and by DHCJ Kent Yee in his decision dated 20 April 2016. Both decisions are decisions made by the Court in the Action.

5. The Action concerns a dispute over a family business known as the Loyal Group:

(1) The Loyal Group was founded by Liao Yo Chang (“Liao Senior”) and is one of the world’s largest manufacturers for EPS, a raw material used in packaging and construction.

(2) Liao Senior was the patriarch of the Liao family comprising inter alia (1) his sons, LCT and Liao Wen Toh (“LWT”) and (2) his wife, Liao Hwang Hsiang (“HH”) (collectively, “Liao Family”). The Liao Family is from Taiwan.

6. As to the structure of the Loyal Group:

(1) The Loyal Group comprises inter alia Ps.

(2) The holding company is Loyal International Enterprises Co Ltd (“LIE”), which is the sole shareholder of P1, P2 and P3. LIE is incorporated in the BVI.

(3) P1, P2 and P3 are all incorporated in Hong Kong and hold shares in wholly-owned subsidiaries in the Mainland China (“the Mainland Subsidiaries”).

7. Prior to Liao Senior’s death in 2010:

(1) LIE was owned by Liao Senior, D and LWT in the proportion of 40%, 40%, and 20% respectively.

(2) LCT was the Chief Executive Officer of the Loyal Group from 2008 to 2010.

8. After Liao Senior’s death in 2010, a power struggle for control of the Loyal Group erupted within the Liao Family, with LWT and HH in one camp, and LCT in another.

9. Liao Senior passed away without leaving a will. By reason of the arrangement prevailing before Liao Senior’s death, Ps’ remaining directors became LCT and Step Harvest Limited (which was merely a nominee director representing Ps’ accountants). It is Ps’ case that immediately after Liao Senior’s death, LCT had sole control of Ps.

10. HH was appointed as administrator of Liao Senior’s estate and proceeded to distribute inter alia Liao Senior’s 20% shareholding in LIE. Following this distribution, LIE was owned by LCT, LWT, and HH in the proportion of 46.6%, 46.6%, and 6.6% respectively. As a result, LWT and HH owned 53.2% of LIE and assumed effective control of LIE and the Loyal Group.

11. According to Ps, on assuming control of LIE, LWT and HH investigated into the financial status of the Loyal Group. Those investigations revealed that, from February to October 2012, LCT had been dissipating the assets of Ps by transferring away their shares in the Mainland Subsidiaries and huge sums of money in the amount of US$92,850,000 (“the Sum”) in Ps’ bank accounts to LCT’s own corporate vehicles. It is the Ps’ case that LCT effectively pillaged Ps of their assets just in time before LWT and HH could regain de facto control of Ps.

12. LWT and HH then took steps to try to regain control of the Ps in the face of stiff resistance by LCT to hold onto Ps. They did so by passing the following resolutions of the Ps (“the Resolutions”):

(1) Resolutions dated 18 March 2015 to impose on LCT (whilst he was still a director of Ps) the obligation to inter alia return of all corporate items, accounting documents and confidential corporate commercial information belonging to Ps and remove himself and others as signatories of the Ps’ bank accounts;

(2) Resolutions dated 9 April 2015 to inter alia remove LCT as a director of each of Ps;

(3) Resolutions dated 26 April 2015 to remove LCT as the bank signatory of the Ps’ accounts.

13. LCT refused to comply with the Resolutions. As a result, Ps applied for an interlocutory injunction by a summons dated 4 August 2015 (“the 2015 Summons”) in the Action to compel LCT to comply with the Resolutions. LCT’s case in opposition was essentially that he was in fact the sole beneficial owner of all of the Mainland Subsidiaries, as he had provided all the financial contributions, and Ps were only investment vehicles.

14. DHCJ Yee allowed Ps’ application as per the 2015 Summons and made the following order against LCT in his decision dated 20 April 2016 (“the Subject Order”):

“1. [LCT] do within 28 days from the date of this Order return all accounting documents of [Ps] that are within his, his servants or agents’ possession, custody, power or control to [Ps]…

2. [LCT] do within 28 days from the date of this Order return all confidential corporate commercial information of [Ps], whether in hard copy, electronic form or otherwise, that are within his, his servants or agents’ possession, custody, power or control to [Ps]… including but not limited to:-

(a) information on the global investments made by [Ps] as of 12 June 2010 and any updates thereafter, including the investment amount, the shareholding of [Ps] in,...

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