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Tam Po Kei v Tam Bo Kin And Others

Judgment Cited authorities 16 Cited in Precedent Map Related
Vincent
Judgment Date11 November 2010
Year2010
Citation[2011] 1 HKLRD 537
Judgement NumberHCMP1590/2006
Subject MatterMiscellaneous Proceedings
CourtHigh Court (Hong Kong)
HCCW379/2007 TAM PO KEI v. ED FORCES TRADING CO LTD AND OTHERS

HCCW 379/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 379 OF 2007

____________

IN THE MATTER of WING KAI INVESTMENT COMPANY LIMITED (永佳置業有限公司)
and
IN THE MATTER of the Companies Ordinance, Cap. 32

____________

And

HCMP 1590/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1590 OF 2006

____________

IN THE MATTER of WING KAI INVESTMENT COMPANY LIMITED (永佳置業有限公司)
and
IN THE MATTER of the Companies Ordinance, Cap. 32

____________

BETWEEN

TAM PO KEI Petitioner
and
TAM BO KIN (alias TAM PO KIN) 1st Respondent
TAM YOU HAUP 2nd Respondent
TAM CHUNG ON 3rd Respondent
TAM LAI CHING 4th Respondent
TAM MEE YING 5th Respondent
WING KAI INVESTMENT COMPANY
LIMITED (永佳置業有限公司) 6th Respondent

____________

(Heard together)

Before: Hon Harris J in Court

Dates of Hearing: 18-22, 25-27, 29 January 2010

Date of Judgment: 11 November 2010

______________

J U D G M E N T

______________

INTRODUCTION

1. The present dispute is between the children of the late Tam Lai Tung (who I shall refer to in this decision, as the parties have done through-out the case, as “Father”) concerning the way in which his eldest son, Tam Bo Kin, managed the affairs of the Company, which is the 6th Respondent, between about 1972 and Father’s death on 24 August 1989. The Petitioner, Bo Kei, is Father’s youngest child by his second wife, who although not a party to these proceedings, is a shareholder in the Company and supports his case. Bo Kei believes that between 1972 and 1989 Bo Kin took advantage of his Father, who was 76 in 1972, and misappropriated money from the Company. Bo Kin’s other siblings, who share the same mother, have sided with him and accept Bo Kin’s explanations, which I explain in detail later, for the way in which he managed the affairs of the Company. They do so simply because they are prepared to believe what he says rather than because they have any independent knowledge of the relevant matters. The dispute has all the hallmarks of long standing and deep rooted resentments, some probably of an emotional rather than a commercial nature, between step relations, which were suppressed whilst the family patriarch was alive, but quickly emerged following his death. This animosity has resulted in 2 proceedings being issued. The first, HCMP 1590 of 2006, is a petition presented on 7 August 2006 under section 168A of the Companies Ordinance, seeking various orders, principally, that Bo Kin account to the Company for monies that he has wrongly received from it and that either the Company or Bo Kin purchase Bo Kei’s shares. The second proceedings, HCCW 379 of 2007, is a petition presented on 21 August 2007 under section 177(1)(a) by the Company for a winding-up order on the grounds that on 9 August 2006 the Company resolved by special resolution at an extraordinary general meeting that it should be wound up.

BACKGROUND

2. The Company was incorporated in December 1964 and used by Father to invest in property in Hong Kong until his death on 24 August 1989. The Company was not the sole means by which Father invested in property. Although, the evidence before me on the subject was sketchy it appears that he also invested in his own name or with others in property in Hong Kong and overseas. There is a dispute about why the Company was established. Bo Kei argues that it was established to provide for Father’s children. The 1st to 5th Respondents believe that it was established as a tax effective way for their Father to manage his affairs. Quite what the tax benefit was intended to be is unclear, but presumably if this was the intention it was driven at least in part by estate planning considerations. On their case their Father treated the Company as his property to do with as he pleased. He did not intend genuinely to divest himself of any property during his lifetime. If this is the case it may have saved some tax, but at the significant price of contributing to a breakdown in the relationships between members of the Tam family and resulted in costly litigation.

3. It is clear that at least during the 1960s Father had absolute control over the Company’s affairs. This is reflected in the Articles of Association. Article 9(1) provides that Father shall be the “Permanent Managing Director” of the Company the until he resigns or dies and that he shall have authority to exercise all the power and authority “vested in the Directors generally, and all the other Directors if any, for the time being of the Company, shall be under his control, and shall be bound to conform to his directions in regard to the Company’s business.” Article 9(2) authorised Father to appoint other directors, determine their powers and duties and fix their remuneration. Father provided all the capital for the establishment of the business and it is common ground that at least until 1971 he was in control of the affairs of the Company. During this period he dealt with the assets of the Company as he saw fit and in a manner, which from a corporate government perspective was unsatisfactory. For example, he appears to have caused the accounting records of the Company to have recorded withdrawals of money from the Company for his own use as payment of salaries and dividends to other directors. No Party complains about this. The 1st to 5th Respondents do, however, point to this as an example of the way in which their Father viewed the Company and also say it is consistent with their explanation of events which took place after 1971 and which form part of the complaints relied on by the Petitioner, Bo Kei.

4. Father was borne on the Mainland in 1896. He had little formal education and could not read or write English. The 1st to 5th Respondents emphasised that he was a traditional Chinese patriarch and that his management of the Company reflected this. Mr Alan Leong SC, who appeared with Mr King Wong for the 1st to 5th Respondents, described him thus in paragraph 1 of his Closing Submissions: “Tam Father…was a conventional Chinese man born in the Tsing Dynasty. He was evidently the authority in the family, with whom no one dared to disagree. Wealth of the Family was created by the Father. Children held properties and monies at Father’s pleasure. Father enjoyed an absolute discretion as to what assets he gave to whom”. This was the tenor of the 1st to 5th Respondents’ evidence, which in general terms was not disputed by Bo Kei, although he painted a picture of a more approachable parent than his older siblings.

5. The Company had from the date of its incorporation paid-up capital of HK$1,000,000 divided into 100 shares registered in the following names:

(1) Father had 20 shares;

(2) His 3 sons (Po Kei, Bo Kin and Po Yuen) also had 20 shares each; and

(3) His 4 daughters (You Haup, Chung On, Lai Ching and Mee Ying) had 5 shares each.

6. As I have explained above Father was appointed as Permanent Managing Director of the Company with the powers contained in article 9 of the Articles of Association. Bo Kin, You Haup, Lai Ching and Po Kei were appointed as permanent directors who are entitled to hold office for life. Po Yuen, Chung On and Mee Ying were also appointed directors and entitled to be re-elected as directors at general meetings. All the parties agree that until 1972 when Bo Kin began to assist his Father in the running of the Company, Father was responsible for managing its business and that no regard was had to the rights and obligations of his children as directors and shareholders. There is a dispute about the degree of control that Bo Kin had in the management of the affairs of the Company from 1972 to his Father’s death in 1989. I address this matter in more detail later in this judgment. It is agreed that until 1989 none of the other siblings had any involvement in the management of the Company. In particular there is no dispute about the following background matters. Bo Kei was only 4 when the Company was incorporated and he had no involvement in the management of the Company until December 1989 when he began to investigate its affairs. Bo Kin had since about 1972, when he was 44, been involved in the day-to-day management of the Company and he accepts that he received payment for so doing.

7. Po Yuen had since 1960, and possibly earlier, been suffering from schizophrenia. From 1968 onwards, he was hospitalised for 2 to 3 weeks at a time at Government mental hospitals. He committed suicide on 29 March 1996. Po Yuen had no involvement in the management of Company, other than co-signing the audited financial statements of the Company for 1972 to 1974 at the request of his older Brother, Bo Kin. With the exception of You Haup all Father’s daughters have since the incorporation of the Company lived in the USA and have not returned to Hong Kong on a regular basis. Chung On and Mee Ying were not involved in the management of the Company until after the Father died when they began to participate at meetings of directors and shareholders indirectly by authorising Bo Kin to represent them. You Haup and Lai Ching similarly began to participate in meetings after Father’s death. They have consistently sided with Bo Kin. It does not seem to me to be in dispute that since Bo Kei began his investigations into the affairs of the Company in 1989, the shareholders have divided into 2 camps: Bo Kei and his mother and the 1st and 5th Respondents. Their views are polarised and my impression during the trial was that there was considerable animosity between them.

8. From 1965, the Company owned various properties, which were transferred from Father to the...

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