HCA394/2010 ANGLO STARLITE INSURANCE CO LTD (In Liquidation) v. TRIPLE INVESTMENTS LTD AND OTHERS - LawHero
HCA394/2010
高等法院（民事訴訟）Deputy High Court Judge L. Chan6/12/2010
合併案件：HCA395/2010HCA397/2010HCA394/2010
HCA394/2010
由此
A A
B B
HCA 394/2010
C IN THE HIGH COURT OF THE C
HONG KONG SPECIAL ADMINISTRATIVE REGION
D D
COURT OF FIRST INSTANCE
E ACTION NO. 394 OF 2010 E
____________
F F
BETWEEN
G G
ANGLO STARLITE INSURANCE Plaintiff
COMPANY LIMITED (In Liquidation)
H H
and
I I
TRIPLE INVESTMENTS LIMITED 1st Defendant
J J
ATMARAM PARSHOTAMDAS BALANI 2nd Defendant
K
MINOO ATMARAM BALANI 3rd Defendant K
MANESH ATMARAM BALANI 4th Defendant
L L
JIGNESH KESHAVLAL SHAH 5th Defendant
M KAI BOON CHEONG 6th Defendant M
NARENDRA RANCHHODDAS MODI 7th Defendant
N ________________ N
O HCA 395/2010 O
IN THE HIGH COURT OF THE
P P
HONG KONG SPECIAL ADMINISTRATIVE REGION
Q COURT OF FIRST INSTANCE Q
ACTION NO. 395 OF 2010
R ____________ R
S BETWEEN S
ANGLO STARLITE INSURANCE Plaintiff
T T
COMPANY LIMITED (In Liquidation)
U U
V V
由此
A
-2- A
B
and B
ATMARAM PARSHOTAMDAS BALANI 1st Defendant
C C
MANESH ATMARAM BALANI 2nd Defendant
D MINOO ATMARAM BALANI 3rd Defendant D
JIGNESH KESHAVLAL SHAH 4th Defendant
E E
KAI BOON CHEONG 5th Defendant
F F
NARENDRA RANCHHODDAS MODI 6th Defendant
________________
G G
HCA 397/2010
H IN THE HIGH COURT OF THE H
HONG KONG SPECIAL ADMINISTRATIVE REGION
I I
COURT OF FIRST INSTANCE
J J
ACTION NO. 397 OF 2010
____________
K K
BETWEEN
L L
ANGLO STARLITE INSURANCE Plaintiff
COMPANY LIMITED (In Liquidation) M
M
and
N N
ATMARAM PARSHOTAMDAS BALANI 1st Defendant
O O
MANESH ATMARAM BALANI 2nd Defendant
P ROHINI ATMARAM BALANI 3rd Defendant P
SAMMY SAMTANI CHOTIRMAL 4th Defendant
Q Q
MINOO ATMARAM BALANI 5th Defendant
R JIGNESH KESHAVLAL SHAH 6th Defendant R
KAI BOON CHEONG 7th Defendant
S S
NARENDRA RANCHHODDAS MODI 8th Defendant
________________ T
T
(Heard Together)
U U
V V
由此
A
-3- A
B
Before: Deputy High Court Judge L. Chan in Chambers B
Date of Hearing: 29 November 2010
C C
Date of Decision: 7 December 2010
D D
_____________
E E
DECISION
_____________
F F
G G
1. There are three appeals by Mrs Minoo Atmaram Balani.
H Master Hui made three orders on 11 October 2010 joining her as a H
defendant in three actions namely, as the 3rd defendant in HCA 394 and
I I
HCA 395 both of 2010 and as the 5th defendant in HCA 397 of 2010.
J These actions are bought by the liquidators of Anglo Starlite Insurance J
Company Limited (“ASI”) which had carried on insurance business in
K K
Hong Kong under the Insurance Companies Ordinance, Cap.41.
L Mrs Balani was joined together with her husband, her son and others as L
additional defendants. After obtaining the Master’s orders, the plaintiff
M M
made some minor revisions to the draft statements of claim and filed them
N in these actions. Mrs Balani now appeals to have these orders set aside. I N
will deal with these appeals one by one.
O O
P P
HCA 394/2010
Q Q
2. In HCA 394/2010, the plaintiff is suing the 1st defendant,
Triple Investments Limited (“Triple”) for repayment of HK$7,850,000 paid R
R
by ASI to Triple by seven cheques dated between 2 April 2003 and 2
S S
March 2004.
T T
The statement of claim
U U
V V
由此
A
-4- A
B
3. The plaintiff pleaded in the statement of claim that Mr and B
Mrs Balani were at all material times two of the directors and controllers of
C C
ASI within the meaning of section 9 of Insurance Ordinance. Section 9 of
D
the Ordinance defines a controller of an insurance company to mean its D
managing director, a chief executive or a person in accordance with whose
E E
instructions the directors of the company are accustomed to act.
F F
4. The plaintiff also pleaded that their son, Mr Balani Junior was
G G
at all material times, a Deputy General Manager and de factor director of
H ASI. H
I I
5. Triple has issued and allotted 5,000,000 shares. Each of Mr
J and Mrs Balani has one share and was and is a director of Triple. Mr J
Balani Junior owns 2,499,999 shares and was and is also a director of
K K
Triple. The remaining 2,499,999 shares are and were at all material times
L registered in the name of Mr Chotirmal, the son-in-law of Mr and Mrs L
Balani.
M M
N 6. The plaintiff pleaded that Mr and Mrs Balani and Mr Balani N
Junior, as de jure or de factor directors of ASI, held jointly or severally or
O O
directly or indirectly a controlling interest in Triple within the meaning of
P section 157H of the Companies Ordinance. P
Q Q
7. The plaintiff further pleaded that Mrs Balani had, together with
R other directors of ASI, caused or knowingly permitted ASI to make the said R
payments to Triple. These payments were not recorded in ASI’s books or
S S
accounts. They were not authorised by any resolution of the board. They
T did not have any discernible commercial purpose or benefit to ASI and ASI T
had no obligation to make them to Triple. There was also no consideration U
U
V V
由此
A
-5- A
B
from Triple for them and they were prohibited by section 157H of the B
Ordinance.
C C
D
8. The plaintiff further pleaded that Mrs Balani and the other D
directors, in causing or knowingly permitting these diversion or
E E
misappropriation of ASI’s assets, had acted in dishonest or fraudulent
F breach of their fiduciary duties to ASI as they knew that the payments were F
contrary to ASI’s interest or were recklessly indifferent as to whether they
G G
were so.
H H
9. The plaintiff also wants to hold Mrs Balani liable for the
I I
payments under section 157I of the Companies Ordinance on the ground
J that she knew or turned a blind eye to the circumstances giving rise to J
ASI’s contravention of section 157H.
K K
L L
The affidavits
M 10. Both Mr and Mrs Balani filed affirmations to oppose the M
application to join them as defendants. Mr Balani said in his affirmation
N N
that the proposed claims against him and his wife were time barred and
O lack of particulars of fraud. He said his wife was only a director of ASI O
and Triple but with no executive role and had never undertaken any
P P
executive duties in either company. She was and is a housewife. She
Q looked after the family and worked as a volunteer for two charities. She Q
had no decision making role in ASI and did little or no work in relation to
R R
its affairs. He did not inform her and she did not know about the operation
S of the business, financial affairs or the accounts of both companies. In S
discharging her duties as a director of the two companies with a non-
T T
executive role, she relied wholly on his advice and instruction.
U U
V V
由此
A
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B
11. He also said that his son, Mr Balani Junior was not a de facto B
director of ASI. He said his son had immigrated to Dubai in February 2002
C C
when he was 26 years old and had little or no involvement in the business
D
or operation of ASI. D
E E
12. Mrs Balani repeated the things said by her husband in her
F affirmation. F
G G
13. The plaintiff responded by an affidavit of Mr Blaauw, one of
H the liquidators of ASI. He referred to his investigations as a liquidator of H
the company and his findings.
I I
J 14. He said in para. 11 of his affidavit that he had found J
documents showing Mrs Balani’s direct involvement with the management
K K
of ASI. The board minutes show that Mrs Balani had attended regular
L board meetings of ASI between 1981 and 1995 (except 1994) and from L
June 2010 onwards (except 2004 and 2008). I note from the table of
M M
meetings produced by Mr Blaauw that she only attended one meeting in
N 2003 which was on 24 September and the two payments before and after N
this meeting were of HK$1,000,000 each on 4 September 2003 and 18
O O
December 2003.
P P
15. Mr Blaauw also referred to the financial reports of ASI. The
Q Q
reports for the years ended 31 December 2003, 31 December 2004,
R 31 December 2007 and 31 December 2008 all state that Mrs Balani was R
one of the directors and controllers of the company.
S S
T 16. The employer’s returns filed by ASI with the Inland Revenue T
Department state that Mrs Balani for the year of 1 April 2007 to 31 March U
U
V V
由此
A
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B
2008 was a director of ASI and had received HK$780,000 salary and B
HK$1,200,000 housing benefits. These payments were larger than those
C C
paid to Mr Balani. The return for 1 April 2008 to 31 March 2009 shows
D
that she had received HK$960,000 salary and HK$1,207,500 housing D
benefit for her directorship. The records of ASI also show that her salary
E E
for her directorship as at 5 May 2009 was HK$80,000 per month and she
F was the second highest paid employee of ASI. F
G G
17. She also attended the board meetings and AGMs of Triple in
H 2008 and 2009 and signed its balance sheet for 2009. These facts therefore H
cast doubt on the allegations of Mr and Mrs Balani that Mrs Balani was not
I I
involved and had no knowledge of the businesses, operations and accounts
J of ASI and Triple. J
K K
18. Though Mr Balani Junior has not been served with the
L proceedings, Mr Blaauw also responded to the allegations made by Mr and L
Mrs Balani in relation to him. Mr Blaauw said in para. 17 of his affidavit
M M
that the employer’s returns filed by ASI with the IRD for the years of
N assessment of 1998/1999 to 2006/2007 state that Mr Balani Junior was the N
Deputy General Manager (Administration). His salary ranged from
O O
HK$20,000 per month to HK$50,000 per month. For the years when ASI
P made the payments in question to Triple, his salary was HK$20,000 per P
month.
Q Q
R 19. There were also two letters dated 20 August 2003 and R
9 November 2005 from ASI to the Ministry of Foreign Affairs of the
S S
central government and the Hong Kong Immigration Department
T T
respectively saying that Mr Balani Junior was the Deputy General Manager
U U
V V
由此
A
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B
of ASI and was required to travel frequently to China and other countries B
for insurance business purposes.
C C
D
20. The financial reports of ASI for the years ended 31 December D
2003, 31 December 2004, 31 December 2007 and 31 December 2008 also
E E
state that Mr Balani Junior was one of the controllers of ASI. Mr Blaauw
F thus concluded that Mr Balani Junior did have a significant role in the F
management and operation of ASI.
G G
H 21. Mr Balani Junior was also a shareholder and director of Triple H
and had attended its board meetings and AGMs in 2008 and 2009.
I I
J 22. On the issue of limitation, Mr Blaauw relied on section 20(1)(a) J
of the Limitation Ordinance which provides:
K K
“(1) No period of limitation prescribed by this Ordinance shall
apply to an action by a beneficiary under a trust, being an action-
L L
(a) in respect of any fraud or fraudulent breach of trust to
M which the trustee was a party or privy.” M
N N
The submissions of Mrs Balani
O O
23. Counsel for Mrs Balani submitted that I should not look at
P Mr Blaauw’s affidavit but should only consider the statement of claim. P
Q Q
24. Regarding limitation, counsel referred to section 20(1)(a) of
R the Ordinance Counsel and submitted that this section only applies to R
fraudulent breaches of existing trusts, not constructive trusts which came
S S
into existence by reason of the alleged fraudulent acts. The question is
T whether the plaintiff has made out a claim that Mrs Balani was a party or T
privy to a fraudulent breach of an existing trust. Counsel submitted in the
U U
V V
由此
A
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B
negative. The reasons put forward by counsel are that there is no allegation B
by the plaintiff that Mrs Balanai had caused the payments to be made. The
C C
allegations that she had knowingly permitted the payments are inconsistent
D
with the facts that these payments were without valid authorisation of the D
board and not recorded in the books. These facts are instead consistent
E E
with Mrs Balani’s case that she had no knowledge of such payments.
F There are also no particulars pleaded to support the allegation that she had F
knowingly permitted the payments or had turned a blind eye to their being
G G
unlawfully made or she had acted in dishonest or fraudulent breach of her
H fiduciary duties to ASI. Counsel thus submitted that there is no cause of H
action for the joinder of Mrs Balani.
I I
J 25. Regarding the claim under section 157H, counsel submitted J
that Mr Balani Junior was neither a de jure or de factor director of ASI.
K K
Therefore, his shareholding in Triple should be excluded for the purpose of
L section 157H. Mr and Mrs Balani together only hold two shares in Triple L
which is not a controlling interest and section 157H would not be invoked.
M M
In support of the allegation that Mr Balani Junior was not a director of ASI,
N counsel relied on the allegations of Mr and Mrs Balani that Mr Balani N
Junior had immigrated to Dubai in February 2002 and had no position in
O O
ASI or any involvement in its business.
P P
26. Furthermore, counsel submitted that even if section 157H is
Q Q
invoked, it is still necessary to prove that Mrs Balani knowingly and
R wilfully authorised or permitted the payments before she could be held R
liable under section 157I(4)(b) of the Companies Ordinance. But there are
S S
no particulars in the statement of claim to support such allegation.
T T
27. Section 157H(2)(c) and section 157I(4)(b) provide: U
U
V V
由此
A
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“157H (2) A company shall not, directly or indirectly-
B B
…
C C
(c) if any one or more of the directors of the company holds
(jointly or severally or directly or indirectly) a controlling
D interest in another company- D
(i) make a loan to that other company;
E E
157I (4) Without prejudice to any liability imposed on directors
of companies otherwise than by this subsection, a director of a F
F
company that has entered into a transaction or arrangement in
contravention of section 157H shall be liable-
G G
…
H (b) jointly and severally with any other director liable under H
this subsection, to indemnify the company for any loss or
damage resulting from that transaction or arrangement, I
I
if-
J J
(i) he knowingly and wilfully authorized or permitted the
transaction or arrangement to be entered into;”
K K
L L
The plaintiff’s submissions
M 28. Counsel for the plaintiff in reply pointed out that there is no M
dispute that Mrs Balani was a director and controller of ASI within the
N N
meaning of section 9 of Insurance Ordinance. Counsel also referred to and
O relied on Mr Blaauw’s affidavit on Mrs Balani’s involvement in ASI’s O
affairs. Counsel submitted that the degree of involvement in the affairs of
P P
ASI (as referred to in para. 11 of Mr Blaauw’s affidavit) and in particular
Q her knowledge of the payments in question are matters of evidence that Q
need not be pleaded.
R R
S 29. Counsel said whether the appeal should be allowed is just like S
whether the claims against Mrs Balani should be struck out and that the act
T T
of striking out should only be exercised in plain and obvious cases.
U U
V V
由此
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B
30. I note that the plaintiff has pleaded in para. 8 of the statement B
of claim that Mrs Balani and the other directors/controllers had caused or
C C
knowingly permitted the payments. The plaintiff has further pleaded in
D
para. 14 that Mrs Balani in her capacity as a director well knew or D
alternatively turned a blind eye to the payments being made without any
E E
valid authorisation of the board or any record in the accounts or the fact
F that they were not for any discernible commercial purpose or benefit to ASI. F
In causing or knowingly permitting the payments being so made, she and
G G
her fellow directors/controllers well knew that or were recklessly
H indifferent as to whether the payments were contrary to ASI’s interests. H
Mrs Balani had therefore acted in dishonest or fraudulent breach of trust.
I I
J 31. However, no particular has been pleaded to support the J
allegations in para. 8 of how Mrs Balani had caused on knowingly
K K
permitted the payments or from which the allegations can be inferred.
L There is also no particular pleaded to support the allegations in para. 14 L
that she knew or had turned a blind eye to how and why the payments were
M M
made or that the payments were contrary to ASI’s interest or from which
N these allegations can be inferred. Counsel maintained that the pleading of N
Mrs Balani as a director and controller of ASI and a director of Triple and
O O
that Triple was a company belonging to her son and son-in-law are
P sufficient particulars, because the liquidators have no direct knowledge of P
her involvement. But counsel also made it clear that, at least for the
Q Q
matters pleaded in para. 14, the plaintiff is not relying on knowledge
R deemed to Mrs Balani merely by virtue of her having been a director of R
ASI.
S S
T T
U U
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由此
A
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B
32. Regarding the limitation point, counsel maintained that there B
has been pleaded against Mrs Balani a case of dishonest or fraudulent
C C
breach of trust in relation to the payments. Hence section 20(1) (a) applies.
D D
33. Finally, on the claim based on the section 157H, counsel
E E
referred to para. 17 of Mr Blaauw’s affidavit and submitted that the matters
F stated therein are sufficient particulars and can be copied to the statement F
of claim, if need be.
G G
H Analyses and decision H
I 34. I agree with counsel for the plaintiff that if I should allow the I
appeal, the effect is equivalent to striking out the plaintiff’s claim against
J J
Mrs Balani. I therefore should not confine myself to the statement of claim
K and should also consider the affidavits. If the claim can be made good with K
further and better particulars, it should also not be struck out (see para.
L L
18/19/4 of Hong Kong Civil Procedure 2001).
M M
35. However, I also agree with counsel for Mrs Balani that there
N N
are insufficient particulars to support the allegations in paras. 8, 14 and 17
O of the statement of claim. The allegations are too general. O
P P
36. Mrs Balani is entitled to know from the statement of claim the
Q matters that the plaintiff intends to establish so as to prove the allegations Q
made against her or to have those allegations inferred. This is particularly
R R
so for allegations of dishonest or fraudulent breach of trust. She is entitled
S to know about them so as to defend herself. She may also plead in the S
defence her positive case, if any, against them. They are the matters
T T
contained in para. 11 of Mr Blaauw’s affidavit. They are the particulars
U U
from which the facts alleged may be inferred. But it is insufficient to state
V V
由此
A
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B
them only in an affidavit. There cannot be joinder of issues on the B
affidavits. They should be pleaded in the statement of claim so that
C C
Mrs Balani can deal with them in her defence. There will then be joinder
D
of issues after the filing of the Reply, if any. D
E E
37. Since there are materials that can be pleaded as particulars to
F support the allegations in paras. 8 and 14 of the statement of claim, I would F
not allow the appeal for lack of particulars or on the ground of limitation. I
G G
would however direct the plaintiff to amend the statement claim within the
H next 14 days by pleading the matters deposed to by Mr Blaauw in para. 14 H
of his affidavit as particulars for the allegations in paras. 8 and 14.
I I
J 38. Regarding the claim pursuant to section 157H, I take the same J
view and would direct the plaintiff to plead the matters in para. 11 of
K K
Mr Blaauw’s affidavit as particulars of Mrs Balani’s knowledge as alleged
L in para. 17(a) of the statement of claim. L
M M
39. I further direct the plaintiff to plead the matters in para. 17 of
N Mr Blaauw’s affidavit as particulars in support of the allegation that Mr N
Balani Junior was at all matter times a de jure or de facto director of ASI.
O O
P P
HCA 395/2010
Q 40. The plaintiff in this action is seeking to recover Q
US$1,297,635.58 which was paid to Mr Balani on 13 September 2007.
R R
S 41. The payment arose as follows as pleaded in para. 8 of the S
statement of claim:
T T
U U
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由此
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“(a) On or about 11 September 2007, Mr Balani entered into a
B B
personal loan facility with HBZ Finance Limited (‘HBZ’)
for a sum of US$1,300,000 (the ‘Loan Facility’);
C C
(b) On the same day, the funds granted pursuant to the Loan
Facility were, upon the instructions of Mr Balani, remitted
D by HBZ into the bank account of one Orsini Middle East D
(Limited Liability Company) (‘Orsini’) with Habib Bank
AG Zurich Dubai (account number …); E
E
(c) On 13 September 2007, Orsini remitted the sum of
F US$1,297,665 to ASI’s bank account at DBS Bank (Hong F
Kong) Limited (account number …)(the ‘DBS Account’) in
payment for 10,000,000 ordinary shares of HK$1.00 each in
G ASI being issued to Mr Balani Junior (the ‘Share G
Acquisition’);
H H
(d) By a board resolution dated 13 September 2007, ASI
approved the Share Acquisition; and
I I
(e) By an application for telegraphic remittance on
13 September 2007, Mr Balani and the 5th Defendant Kai
J Boon Cheong caused ASI to transfer the sum of J
US$1,297,635.58 from the DBS Account received from
K
Orsini to HBZ in partial repayment of the Loan Facility on K
behalf of Mr Balani (the ‘Repayment’).”
L L
Mr Balani Junior is and was at all matter times a director/shareholder and
M
managing director of Orsini. M
N N
42. Since this action was started on 17 March 2010, the issue of
O limitation does not arise. O
P P
43. The plaintiff pleaded in para. 9 of the statement of claim that
Q the Repayment was without any resolution of the board of ASI and it did Q
not have any discernible commercial purpose of benefit to ASI and ASI
R R
had not receive any consideration and was under no obligation to pay it.
S The Repayment also amounted to ASI’s provision of financial assistance to S
Mr Balani Junior to acquire the shares of ASI in contravention of
T T
section 47(A) of the Companies Ordinance. If the Repayment was a loan
U U
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由此
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B
to Mr Balani, it was also made in contravention of section 157H of the B
Ordinance.
C C
D
44. The plaintiff pleaded in para. 10 that Mrs Balani and the other D
directors of ASI knew or turned a blind eye to the wrongful making of the
E E
Repayment which was in contravention of section 157H as pleaded in paras.
F 8 and 9. They also knew that the Repayment was contrary to the interests F
of ASI or were recklessly indifferent as to whether it was so. In causing or
G G
knowingly permitting it to be made, they were in dishonest or fraudulent
H breach of their fiduciary duties to ASI. Alternatively, they were in H
negligent breach of their duties as they knew about the wrongful payment
I I
but took no step to stop it or to recover it or to report the matter to the
J authorities. The plaintiff further seeks to hold Mrs Balani responsible J
under sections 157H and 157I of the Companies Ordinance.
K K
L 45. There is again no particular to support the allegations of L
knowledge or turning a blind eye or reckless indifference.
M M
N 46. Mrs Balani made an affirmation to oppose her joinder. She N
again said she and her son had no executive role or involvement with the
O O
business and operation of ASI. She also said the draft statement of claim
P had no particulars of fraud. P
Q Q
47. The plaintiff again filed an affidavit of Mr Blaauw where he
R repeated in para. 10 of what he had said in para. 11 of his affidavit filed in R
HCA 394/2010 except that he referred to Mrs Balani’s attendance of a
S S
board meeting of ASI on 25 October 2007 which was close to 13
T September 2007 when the Repayment was made. T
U U
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由此
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B
48. Counsel on both sides repeated their arguments on the B
sufficiency or otherwise of particulars of fraud in the statement of claim.
C C
D
49. For the same reasons I have given in HCA 394/2010, I would D
also dismiss this appeal. I also direct the plaintiff to amend the statement
E E
of claim by pleading the matters in para. 10 of Mr Blaauw’s affidavit as
F particulars of the allegations in para. 10 of the statement of claim. F
G G
HCA 397/2010
H H
50. This is an action by ASI to recover monies payable for its
I shares allotted and recorded as fully paid up shares. These allotments were I
made to Mr Balani, Mr Balani Junior, Ms Balani, the daughter of Mr and
J J
Mrs Balani, and Mr Chotirmal, their son-in-law.
K K
51. There were three allotments to Mr Balani made between April
L L
2002 and January 2003 for 15 million shares of ASI at a consideration of
M HK$15,000,000. M
N N
52. There were 10 allotments to Mr Balani Junior made between
O July 2000 and August 2004 for 47 million shares at HK$47,000,000. Five O
of these allotments were made after 17 March 2004 and the issue of
P P
limitation does not arise in respect of them.
Q Q
53. There were three allotments to Ms Balani made between April
R R
2001 and April 2003 for 10 million shares at HK$10,000,000.
S S
54. Lastly, there were two allotments to Mr Chotirmal in
T T
December 2000 and December 2001 for 8 million shares for HK$8,000,000.
U U
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由此
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B
55. Each of these allotments was made pursuant to a share B
application signed by the allottee and countersigned by Mr Balani or his
C C
fellow director, the 7th defendant, on behalf of ASI and recording receipt
D
of the allotment monies. Each of them had also been approved by a D
purported board resolution signed by Mr Balani as chairman and recorded
E E
in the share register as fully paid up.
F F
56. The plaintiff’s claim against Mrs Balani, as pleaded in paras.
G G
15(c), 16(c), 17(c) and 18(c) of statement of claim, is that she was a
H director of ASI and well knew or had turned a blind eye to the fact of no H
allotment money having been received by ASI for all these allotments, and
I I
notwithstanding such knowledge, she caused or knowingly permitted the
J shares to be recorded in the share register as fully paid up. These amounted J
to dishonest or fraudulent breaches of her fiduciary duties to ASI.
K K
However, there is again no particular pleaded to support these allegations
L of knowledge or turning a blind eye or knowingly permitting the L
commission of the wrongs.
M M
N 57. Mrs Balani also made an affirmation to oppose her joinder. N
She repeated that she was a housewife and had no role to play in the
O O
business and operation of ASI. Her son had also immigrated to Dubai and
P had no role to play in ASI either. She also attacked the draft statement of P
claim for want of particulars of fraud.
Q Q
R 58. Mr Blaauw also made an affidavit to respond. He repeated in R
para. 10 of what he had said in para. 11 of his affidavit filed in
S S
HCA 394/2010 except that he referred to Mrs Balani’s attendance of two
T T
board meetings on 21 June 2002 and 24 September 2009 which were about
the time of some of the allotments. U
U
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由此
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B
59. Counsel on both sides made the same arguments on particulars B
of fraud and limitation. The plaintiff also relies on section 20(1) (a) of the
C C
Limitation Ordinance.
D D
60. Counsel for Mrs Balani made a further point that the shares
E E
allotted by ASI had never been the assets of ASI and she could not be held
F liable to ASI for wrongful disposal of these shares. However, this is a F
misconceived point. I agree with counsel for the plaintiff that the claim is
G G
for the allotment monies which had never been received but recorded as
H having been received. The rights to receive these monies are certainly the H
assets of ASI. ASI is not seeking to set aside the allotments either.
I I
J 61. For the same reasons I gave in HCA 394/2010 and J
HCA 395/2010, I also dismiss this appeal. I also direct the plaintiff to
K K
amend the statement of claim by pleading the matters in para. 10 of
L Mr Blaauw’s affidavit as particulars of the allegations in paras. 15(c), 16(c), L
17(c) and 18(c) of the statement of claim.
M M
N N
Costs orders nisi
O 62. I now turn to costs. Though the plaintiff has succeeded in O
opposing the three appeals, its success is a qualified one. The claims
P P
against Mrs Balani are all based on dishonest or fraudulent breach of trust,
Q but no particulars are pleaded. They are only contained in the affidavits of Q
Mr Blaauw. This is improper.
R R
S 63. Mrs Balani’s complaints for want of particulars of fraud are S
justified. However, she has taken a wrong move in appealing against the
T T
Master’s orders. She should have applied for further and better particulars.
U U
V V
由此
A
- 19 - A
B
64. In the circumstances, I make the same costs order nisi for the B
three appeals that Mrs Balani do pay 50% of the costs of the appeal to the
C C
plaintiff. I also certify the matters fit for one counsel. These costs are to be
D
assessed by me summarily at a 9:30 a.m. hearing to be fixed by the parties D
and be payable forthwith upon assessment.
E E
F F
G G
H (L. Chan) H
Deputy High Court Judge
I I
Mr Douglas Lam, instructed by Messrs Hogan Lovells, for the Plaintiff
J J
Mr Paul J Carolan, instructed by Messrs Andrew W Y Ng & Co., for the
K 3rd Defendant (in HCA 394/2010 and HCA 395/2010), 5th Defendant (in K
HCA 397/2010)
L L
M M
N N
O O
P P
Q Q
R R
S S
T T
U U
V V
ANGLO STARLITE INSURANCE CO LTD (In Liquidation) v. TRIPLE INVESTMENTS LTD AND OTHERS
由此
A A
B B
HCA 394/2010
C IN THE HIGH COURT OF THE C
HONG KONG SPECIAL ADMINISTRATIVE REGION
D D
COURT OF FIRST INSTANCE
E ACTION NO. 394 OF 2010 E
____________
F F
BETWEEN
G G
ANGLO STARLITE INSURANCE Plaintiff
COMPANY LIMITED (In Liquidation)
H H
and
I I
TRIPLE INVESTMENTS LIMITED 1st Defendant
J J
ATMARAM PARSHOTAMDAS BALANI 2nd Defendant
K
MINOO ATMARAM BALANI 3rd Defendant K
MANESH ATMARAM BALANI 4th Defendant
L L
JIGNESH KESHAVLAL SHAH 5th Defendant
M KAI BOON CHEONG 6th Defendant M
NARENDRA RANCHHODDAS MODI 7th Defendant
N ________________ N
O HCA 395/2010 O
IN THE HIGH COURT OF THE
P P
HONG KONG SPECIAL ADMINISTRATIVE REGION
Q COURT OF FIRST INSTANCE Q
ACTION NO. 395 OF 2010
R ____________ R
S BETWEEN S
ANGLO STARLITE INSURANCE Plaintiff
T T
COMPANY LIMITED (In Liquidation)
U U
V V
由此
A
-2- A
B
and B
ATMARAM PARSHOTAMDAS BALANI 1st Defendant
C C
MANESH ATMARAM BALANI 2nd Defendant
D MINOO ATMARAM BALANI 3rd Defendant D
JIGNESH KESHAVLAL SHAH 4th Defendant
E E
KAI BOON CHEONG 5th Defendant
F F
NARENDRA RANCHHODDAS MODI 6th Defendant
________________
G G
HCA 397/2010
H IN THE HIGH COURT OF THE H
HONG KONG SPECIAL ADMINISTRATIVE REGION
I I
COURT OF FIRST INSTANCE
J J
ACTION NO. 397 OF 2010
____________
K K
BETWEEN
L L
ANGLO STARLITE INSURANCE Plaintiff
COMPANY LIMITED (In Liquidation) M
M
and
N N
ATMARAM PARSHOTAMDAS BALANI 1st Defendant
O O
MANESH ATMARAM BALANI 2nd Defendant
P ROHINI ATMARAM BALANI 3rd Defendant P
SAMMY SAMTANI CHOTIRMAL 4th Defendant
Q Q
MINOO ATMARAM BALANI 5th Defendant
R JIGNESH KESHAVLAL SHAH 6th Defendant R
KAI BOON CHEONG 7th Defendant
S S
NARENDRA RANCHHODDAS MODI 8th Defendant
________________ T
T
(Heard Together)
U U
V V
由此
A
-3- A
B
Before: Deputy High Court Judge L. Chan in Chambers B
Date of Hearing: 29 November 2010
C C
Date of Decision: 7 December 2010
D D
_____________
E E
DECISION
_____________
F F
G G
1. There are three appeals by Mrs Minoo Atmaram Balani.
H Master Hui made three orders on 11 October 2010 joining her as a H
defendant in three actions namely, as the 3rd defendant in HCA 394 and
I I
HCA 395 both of 2010 and as the 5th defendant in HCA 397 of 2010.
J These actions are bought by the liquidators of Anglo Starlite Insurance J
Company Limited (“ASI”) which had carried on insurance business in
K K
Hong Kong under the Insurance Companies Ordinance, Cap.41.
L Mrs Balani was joined together with her husband, her son and others as L
additional defendants. After obtaining the Master’s orders, the plaintiff
M M
made some minor revisions to the draft statements of claim and filed them
N in these actions. Mrs Balani now appeals to have these orders set aside. I N
will deal with these appeals one by one.
O O
P P
HCA 394/2010
Q Q
2. In HCA 394/2010, the plaintiff is suing the 1st defendant,
Triple Investments Limited (“Triple”) for repayment of HK$7,850,000 paid R
R
by ASI to Triple by seven cheques dated between 2 April 2003 and 2
S S
March 2004.
T T
The statement of claim
U U
V V
由此
A
-4- A
B
3. The plaintiff pleaded in the statement of claim that Mr and B
Mrs Balani were at all material times two of the directors and controllers of
C C
ASI within the meaning of section 9 of Insurance Ordinance. Section 9 of
D
the Ordinance defines a controller of an insurance company to mean its D
managing director, a chief executive or a person in accordance with whose
E E
instructions the directors of the company are accustomed to act.
F F
4. The plaintiff also pleaded that their son, Mr Balani Junior was
G G
at all material times, a Deputy General Manager and de factor director of
H ASI. H
I I
5. Triple has issued and allotted 5,000,000 shares. Each of Mr
J and Mrs Balani has one share and was and is a director of Triple. Mr J
Balani Junior owns 2,499,999 shares and was and is also a director of
K K
Triple. The remaining 2,499,999 shares are and were at all material times
L registered in the name of Mr Chotirmal, the son-in-law of Mr and Mrs L
Balani.
M M
N 6. The plaintiff pleaded that Mr and Mrs Balani and Mr Balani N
Junior, as de jure or de factor directors of ASI, held jointly or severally or
O O
directly or indirectly a controlling interest in Triple within the meaning of
P section 157H of the Companies Ordinance. P
Q Q
7. The plaintiff further pleaded that Mrs Balani had, together with
R other directors of ASI, caused or knowingly permitted ASI to make the said R
payments to Triple. These payments were not recorded in ASI’s books or
S S
accounts. They were not authorised by any resolution of the board. They
T did not have any discernible commercial purpose or benefit to ASI and ASI T
had no obligation to make them to Triple. There was also no consideration U
U
V V
由此
A
-5- A
B
from Triple for them and they were prohibited by section 157H of the B
Ordinance.
C C
D
8. The plaintiff further pleaded that Mrs Balani and the other D
directors, in causing or knowingly permitting these diversion or
E E
misappropriation of ASI’s assets, had acted in dishonest or fraudulent
F breach of their fiduciary duties to ASI as they knew that the payments were F
contrary to ASI’s interest or were recklessly indifferent as to whether they
G G
were so.
H H
9. The plaintiff also wants to hold Mrs Balani liable for the
I I
payments under section 157I of the Companies Ordinance on the ground
J that she knew or turned a blind eye to the circumstances giving rise to J
ASI’s contravention of section 157H.
K K
L L
The affidavits
M 10. Both Mr and Mrs Balani filed affirmations to oppose the M
application to join them as defendants. Mr Balani said in his affirmation
N N
that the proposed claims against him and his wife were time barred and
O lack of particulars of fraud. He said his wife was only a director of ASI O
and Triple but with no executive role and had never undertaken any
P P
executive duties in either company. She was and is a housewife. She
Q looked after the family and worked as a volunteer for two charities. She Q
had no decision making role in ASI and did little or no work in relation to
R R
its affairs. He did not inform her and she did not know about the operation
S of the business, financial affairs or the accounts of both companies. In S
discharging her duties as a director of the two companies with a non-
T T
executive role, she relied wholly on his advice and instruction.
U U
V V
由此
A
-6- A
B
11. He also said that his son, Mr Balani Junior was not a de facto B
director of ASI. He said his son had immigrated to Dubai in February 2002
C C
when he was 26 years old and had little or no involvement in the business
D
or operation of ASI. D
E E
12. Mrs Balani repeated the things said by her husband in her
F affirmation. F
G G
13. The plaintiff responded by an affidavit of Mr Blaauw, one of
H the liquidators of ASI. He referred to his investigations as a liquidator of H
the company and his findings.
I I
J 14. He said in para. 11 of his affidavit that he had found J
documents showing Mrs Balani’s direct involvement with the management
K K
of ASI. The board minutes show that Mrs Balani had attended regular
L board meetings of ASI between 1981 and 1995 (except 1994) and from L
June 2010 onwards (except 2004 and 2008). I note from the table of
M M
meetings produced by Mr Blaauw that she only attended one meeting in
N 2003 which was on 24 September and the two payments before and after N
this meeting were of HK$1,000,000 each on 4 September 2003 and 18
O O
December 2003.
P P
15. Mr Blaauw also referred to the financial reports of ASI. The
Q Q
reports for the years ended 31 December 2003, 31 December 2004,
R 31 December 2007 and 31 December 2008 all state that Mrs Balani was R
one of the directors and controllers of the company.
S S
T 16. The employer’s returns filed by ASI with the Inland Revenue T
Department state that Mrs Balani for the year of 1 April 2007 to 31 March U
U
V V
由此
A
-7- A
B
2008 was a director of ASI and had received HK$780,000 salary and B
HK$1,200,000 housing benefits. These payments were larger than those
C C
paid to Mr Balani. The return for 1 April 2008 to 31 March 2009 shows
D
that she had received HK$960,000 salary and HK$1,207,500 housing D
benefit for her directorship. The records of ASI also show that her salary
E E
for her directorship as at 5 May 2009 was HK$80,000 per month and she
F was the second highest paid employee of ASI. F
G G
17. She also attended the board meetings and AGMs of Triple in
H 2008 and 2009 and signed its balance sheet for 2009. These facts therefore H
cast doubt on the allegations of Mr and Mrs Balani that Mrs Balani was not
I I
involved and had no knowledge of the businesses, operations and accounts
J of ASI and Triple. J
K K
18. Though Mr Balani Junior has not been served with the
L proceedings, Mr Blaauw also responded to the allegations made by Mr and L
Mrs Balani in relation to him. Mr Blaauw said in para. 17 of his affidavit
M M
that the employer’s returns filed by ASI with the IRD for the years of
N assessment of 1998/1999 to 2006/2007 state that Mr Balani Junior was the N
Deputy General Manager (Administration). His salary ranged from
O O
HK$20,000 per month to HK$50,000 per month. For the years when ASI
P made the payments in question to Triple, his salary was HK$20,000 per P
month.
Q Q
R 19. There were also two letters dated 20 August 2003 and R
9 November 2005 from ASI to the Ministry of Foreign Affairs of the
S S
central government and the Hong Kong Immigration Department
T T
respectively saying that Mr Balani Junior was the Deputy General Manager
U U
V V
由此
A
-8- A
B
of ASI and was required to travel frequently to China and other countries B
for insurance business purposes.
C C
D
20. The financial reports of ASI for the years ended 31 December D
2003, 31 December 2004, 31 December 2007 and 31 December 2008 also
E E
state that Mr Balani Junior was one of the controllers of ASI. Mr Blaauw
F thus concluded that Mr Balani Junior did have a significant role in the F
management and operation of ASI.
G G
H 21. Mr Balani Junior was also a shareholder and director of Triple H
and had attended its board meetings and AGMs in 2008 and 2009.
I I
J 22. On the issue of limitation, Mr Blaauw relied on section 20(1)(a) J
of the Limitation Ordinance which provides:
K K
“(1) No period of limitation prescribed by this Ordinance shall
apply to an action by a beneficiary under a trust, being an action-
L L
(a) in respect of any fraud or fraudulent breach of trust to
M which the trustee was a party or privy.” M
N N
The submissions of Mrs Balani
O O
23. Counsel for Mrs Balani submitted that I should not look at
P Mr Blaauw’s affidavit but should only consider the statement of claim. P
Q Q
24. Regarding limitation, counsel referred to section 20(1)(a) of
R the Ordinance Counsel and submitted that this section only applies to R
fraudulent breaches of existing trusts, not constructive trusts which came
S S
into existence by reason of the alleged fraudulent acts. The question is
T whether the plaintiff has made out a claim that Mrs Balani was a party or T
privy to a fraudulent breach of an existing trust. Counsel submitted in the
U U
V V
由此
A
-9- A
B
negative. The reasons put forward by counsel are that there is no allegation B
by the plaintiff that Mrs Balanai had caused the payments to be made. The
C C
allegations that she had knowingly permitted the payments are inconsistent
D
with the facts that these payments were without valid authorisation of the D
board and not recorded in the books. These facts are instead consistent
E E
with Mrs Balani’s case that she had no knowledge of such payments.
F There are also no particulars pleaded to support the allegation that she had F
knowingly permitted the payments or had turned a blind eye to their being
G G
unlawfully made or she had acted in dishonest or fraudulent breach of her
H fiduciary duties to ASI. Counsel thus submitted that there is no cause of H
action for the joinder of Mrs Balani.
I I
J 25. Regarding the claim under section 157H, counsel submitted J
that Mr Balani Junior was neither a de jure or de factor director of ASI.
K K
Therefore, his shareholding in Triple should be excluded for the purpose of
L section 157H. Mr and Mrs Balani together only hold two shares in Triple L
which is not a controlling interest and section 157H would not be invoked.
M M
In support of the allegation that Mr Balani Junior was not a director of ASI,
N counsel relied on the allegations of Mr and Mrs Balani that Mr Balani N
Junior had immigrated to Dubai in February 2002 and had no position in
O O
ASI or any involvement in its business.
P P
26. Furthermore, counsel submitted that even if section 157H is
Q Q
invoked, it is still necessary to prove that Mrs Balani knowingly and
R wilfully authorised or permitted the payments before she could be held R
liable under section 157I(4)(b) of the Companies Ordinance. But there are
S S
no particulars in the statement of claim to support such allegation.
T T
27. Section 157H(2)(c) and section 157I(4)(b) provide: U
U
V V
由此
A
- 10 - A
“157H (2) A company shall not, directly or indirectly-
B B
…
C C
(c) if any one or more of the directors of the company holds
(jointly or severally or directly or indirectly) a controlling
D interest in another company- D
(i) make a loan to that other company;
E E
157I (4) Without prejudice to any liability imposed on directors
of companies otherwise than by this subsection, a director of a F
F
company that has entered into a transaction or arrangement in
contravention of section 157H shall be liable-
G G
…
H (b) jointly and severally with any other director liable under H
this subsection, to indemnify the company for any loss or
damage resulting from that transaction or arrangement, I
I
if-
J J
(i) he knowingly and wilfully authorized or permitted the
transaction or arrangement to be entered into;”
K K
L L
The plaintiff’s submissions
M 28. Counsel for the plaintiff in reply pointed out that there is no M
dispute that Mrs Balani was a director and controller of ASI within the
N N
meaning of section 9 of Insurance Ordinance. Counsel also referred to and
O relied on Mr Blaauw’s affidavit on Mrs Balani’s involvement in ASI’s O
affairs. Counsel submitted that the degree of involvement in the affairs of
P P
ASI (as referred to in para. 11 of Mr Blaauw’s affidavit) and in particular
Q her knowledge of the payments in question are matters of evidence that Q
need not be pleaded.
R R
S 29. Counsel said whether the appeal should be allowed is just like S
whether the claims against Mrs Balani should be struck out and that the act
T T
of striking out should only be exercised in plain and obvious cases.
U U
V V
由此
A
- 11 - A
B
30. I note that the plaintiff has pleaded in para. 8 of the statement B
of claim that Mrs Balani and the other directors/controllers had caused or
C C
knowingly permitted the payments. The plaintiff has further pleaded in
D
para. 14 that Mrs Balani in her capacity as a director well knew or D
alternatively turned a blind eye to the payments being made without any
E E
valid authorisation of the board or any record in the accounts or the fact
F that they were not for any discernible commercial purpose or benefit to ASI. F
In causing or knowingly permitting the payments being so made, she and
G G
her fellow directors/controllers well knew that or were recklessly
H indifferent as to whether the payments were contrary to ASI’s interests. H
Mrs Balani had therefore acted in dishonest or fraudulent breach of trust.
I I
J 31. However, no particular has been pleaded to support the J
allegations in para. 8 of how Mrs Balani had caused on knowingly
K K
permitted the payments or from which the allegations can be inferred.
L There is also no particular pleaded to support the allegations in para. 14 L
that she knew or had turned a blind eye to how and why the payments were
M M
made or that the payments were contrary to ASI’s interest or from which
N these allegations can be inferred. Counsel maintained that the pleading of N
Mrs Balani as a director and controller of ASI and a director of Triple and
O O
that Triple was a company belonging to her son and son-in-law are
P sufficient particulars, because the liquidators have no direct knowledge of P
her involvement. But counsel also made it clear that, at least for the
Q Q
matters pleaded in para. 14, the plaintiff is not relying on knowledge
R deemed to Mrs Balani merely by virtue of her having been a director of R
ASI.
S S
T T
U U
V V
由此
A
- 12 - A
B
32. Regarding the limitation point, counsel maintained that there B
has been pleaded against Mrs Balani a case of dishonest or fraudulent
C C
breach of trust in relation to the payments. Hence section 20(1) (a) applies.
D D
33. Finally, on the claim based on the section 157H, counsel
E E
referred to para. 17 of Mr Blaauw’s affidavit and submitted that the matters
F stated therein are sufficient particulars and can be copied to the statement F
of claim, if need be.
G G
H Analyses and decision H
I 34. I agree with counsel for the plaintiff that if I should allow the I
appeal, the effect is equivalent to striking out the plaintiff’s claim against
J J
Mrs Balani. I therefore should not confine myself to the statement of claim
K and should also consider the affidavits. If the claim can be made good with K
further and better particulars, it should also not be struck out (see para.
L L
18/19/4 of Hong Kong Civil Procedure 2001).
M M
35. However, I also agree with counsel for Mrs Balani that there
N N
are insufficient particulars to support the allegations in paras. 8, 14 and 17
O of the statement of claim. The allegations are too general. O
P P
36. Mrs Balani is entitled to know from the statement of claim the
Q matters that the plaintiff intends to establish so as to prove the allegations Q
made against her or to have those allegations inferred. This is particularly
R R
so for allegations of dishonest or fraudulent breach of trust. She is entitled
S to know about them so as to defend herself. She may also plead in the S
defence her positive case, if any, against them. They are the matters
T T
contained in para. 11 of Mr Blaauw’s affidavit. They are the particulars
U U
from which the facts alleged may be inferred. But it is insufficient to state
V V
由此
A
- 13 - A
B
them only in an affidavit. There cannot be joinder of issues on the B
affidavits. They should be pleaded in the statement of claim so that
C C
Mrs Balani can deal with them in her defence. There will then be joinder
D
of issues after the filing of the Reply, if any. D
E E
37. Since there are materials that can be pleaded as particulars to
F support the allegations in paras. 8 and 14 of the statement of claim, I would F
not allow the appeal for lack of particulars or on the ground of limitation. I
G G
would however direct the plaintiff to amend the statement claim within the
H next 14 days by pleading the matters deposed to by Mr Blaauw in para. 14 H
of his affidavit as particulars for the allegations in paras. 8 and 14.
I I
J 38. Regarding the claim pursuant to section 157H, I take the same J
view and would direct the plaintiff to plead the matters in para. 11 of
K K
Mr Blaauw’s affidavit as particulars of Mrs Balani’s knowledge as alleged
L in para. 17(a) of the statement of claim. L
M M
39. I further direct the plaintiff to plead the matters in para. 17 of
N Mr Blaauw’s affidavit as particulars in support of the allegation that Mr N
Balani Junior was at all matter times a de jure or de facto director of ASI.
O O
P P
HCA 395/2010
Q 40. The plaintiff in this action is seeking to recover Q
US$1,297,635.58 which was paid to Mr Balani on 13 September 2007.
R R
S 41. The payment arose as follows as pleaded in para. 8 of the S
statement of claim:
T T
U U
V V
由此
A
- 14 - A
“(a) On or about 11 September 2007, Mr Balani entered into a
B B
personal loan facility with HBZ Finance Limited (‘HBZ’)
for a sum of US$1,300,000 (the ‘Loan Facility’);
C C
(b) On the same day, the funds granted pursuant to the Loan
Facility were, upon the instructions of Mr Balani, remitted
D by HBZ into the bank account of one Orsini Middle East D
(Limited Liability Company) (‘Orsini’) with Habib Bank
AG Zurich Dubai (account number …); E
E
(c) On 13 September 2007, Orsini remitted the sum of
F US$1,297,665 to ASI’s bank account at DBS Bank (Hong F
Kong) Limited (account number …)(the ‘DBS Account’) in
payment for 10,000,000 ordinary shares of HK$1.00 each in
G ASI being issued to Mr Balani Junior (the ‘Share G
Acquisition’);
H H
(d) By a board resolution dated 13 September 2007, ASI
approved the Share Acquisition; and
I I
(e) By an application for telegraphic remittance on
13 September 2007, Mr Balani and the 5th Defendant Kai
J Boon Cheong caused ASI to transfer the sum of J
US$1,297,635.58 from the DBS Account received from
K
Orsini to HBZ in partial repayment of the Loan Facility on K
behalf of Mr Balani (the ‘Repayment’).”
L L
Mr Balani Junior is and was at all matter times a director/shareholder and
M
managing director of Orsini. M
N N
42. Since this action was started on 17 March 2010, the issue of
O limitation does not arise. O
P P
43. The plaintiff pleaded in para. 9 of the statement of claim that
Q the Repayment was without any resolution of the board of ASI and it did Q
not have any discernible commercial purpose of benefit to ASI and ASI
R R
had not receive any consideration and was under no obligation to pay it.
S The Repayment also amounted to ASI’s provision of financial assistance to S
Mr Balani Junior to acquire the shares of ASI in contravention of
T T
section 47(A) of the Companies Ordinance. If the Repayment was a loan
U U
V V
由此
A
- 15 - A
B
to Mr Balani, it was also made in contravention of section 157H of the B
Ordinance.
C C
D
44. The plaintiff pleaded in para. 10 that Mrs Balani and the other D
directors of ASI knew or turned a blind eye to the wrongful making of the
E E
Repayment which was in contravention of section 157H as pleaded in paras.
F 8 and 9. They also knew that the Repayment was contrary to the interests F
of ASI or were recklessly indifferent as to whether it was so. In causing or
G G
knowingly permitting it to be made, they were in dishonest or fraudulent
H breach of their fiduciary duties to ASI. Alternatively, they were in H
negligent breach of their duties as they knew about the wrongful payment
I I
but took no step to stop it or to recover it or to report the matter to the
J authorities. The plaintiff further seeks to hold Mrs Balani responsible J
under sections 157H and 157I of the Companies Ordinance.
K K
L 45. There is again no particular to support the allegations of L
knowledge or turning a blind eye or reckless indifference.
M M
N 46. Mrs Balani made an affirmation to oppose her joinder. She N
again said she and her son had no executive role or involvement with the
O O
business and operation of ASI. She also said the draft statement of claim
P had no particulars of fraud. P
Q Q
47. The plaintiff again filed an affidavit of Mr Blaauw where he
R repeated in para. 10 of what he had said in para. 11 of his affidavit filed in R
HCA 394/2010 except that he referred to Mrs Balani’s attendance of a
S S
board meeting of ASI on 25 October 2007 which was close to 13
T September 2007 when the Repayment was made. T
U U
V V
由此
A
- 16 - A
B
48. Counsel on both sides repeated their arguments on the B
sufficiency or otherwise of particulars of fraud in the statement of claim.
C C
D
49. For the same reasons I have given in HCA 394/2010, I would D
also dismiss this appeal. I also direct the plaintiff to amend the statement
E E
of claim by pleading the matters in para. 10 of Mr Blaauw’s affidavit as
F particulars of the allegations in para. 10 of the statement of claim. F
G G
HCA 397/2010
H H
50. This is an action by ASI to recover monies payable for its
I shares allotted and recorded as fully paid up shares. These allotments were I
made to Mr Balani, Mr Balani Junior, Ms Balani, the daughter of Mr and
J J
Mrs Balani, and Mr Chotirmal, their son-in-law.
K K
51. There were three allotments to Mr Balani made between April
L L
2002 and January 2003 for 15 million shares of ASI at a consideration of
M HK$15,000,000. M
N N
52. There were 10 allotments to Mr Balani Junior made between
O July 2000 and August 2004 for 47 million shares at HK$47,000,000. Five O
of these allotments were made after 17 March 2004 and the issue of
P P
limitation does not arise in respect of them.
Q Q
53. There were three allotments to Ms Balani made between April
R R
2001 and April 2003 for 10 million shares at HK$10,000,000.
S S
54. Lastly, there were two allotments to Mr Chotirmal in
T T
December 2000 and December 2001 for 8 million shares for HK$8,000,000.
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由此
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B
55. Each of these allotments was made pursuant to a share B
application signed by the allottee and countersigned by Mr Balani or his
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fellow director, the 7th defendant, on behalf of ASI and recording receipt
D
of the allotment monies. Each of them had also been approved by a D
purported board resolution signed by Mr Balani as chairman and recorded
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in the share register as fully paid up.
F F
56. The plaintiff’s claim against Mrs Balani, as pleaded in paras.
G G
15(c), 16(c), 17(c) and 18(c) of statement of claim, is that she was a
H director of ASI and well knew or had turned a blind eye to the fact of no H
allotment money having been received by ASI for all these allotments, and
I I
notwithstanding such knowledge, she caused or knowingly permitted the
J shares to be recorded in the share register as fully paid up. These amounted J
to dishonest or fraudulent breaches of her fiduciary duties to ASI.
K K
However, there is again no particular pleaded to support these allegations
L of knowledge or turning a blind eye or knowingly permitting the L
commission of the wrongs.
M M
N 57. Mrs Balani also made an affirmation to oppose her joinder. N
She repeated that she was a housewife and had no role to play in the
O O
business and operation of ASI. Her son had also immigrated to Dubai and
P had no role to play in ASI either. She also attacked the draft statement of P
claim for want of particulars of fraud.
Q Q
R 58. Mr Blaauw also made an affidavit to respond. He repeated in R
para. 10 of what he had said in para. 11 of his affidavit filed in
S S
HCA 394/2010 except that he referred to Mrs Balani’s attendance of two
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board meetings on 21 June 2002 and 24 September 2009 which were about
the time of some of the allotments. U
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由此
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B
59. Counsel on both sides made the same arguments on particulars B
of fraud and limitation. The plaintiff also relies on section 20(1) (a) of the
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Limitation Ordinance.
D D
60. Counsel for Mrs Balani made a further point that the shares
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allotted by ASI had never been the assets of ASI and she could not be held
F liable to ASI for wrongful disposal of these shares. However, this is a F
misconceived point. I agree with counsel for the plaintiff that the claim is
G G
for the allotment monies which had never been received but recorded as
H having been received. The rights to receive these monies are certainly the H
assets of ASI. ASI is not seeking to set aside the allotments either.
I I
J 61. For the same reasons I gave in HCA 394/2010 and J
HCA 395/2010, I also dismiss this appeal. I also direct the plaintiff to
K K
amend the statement of claim by pleading the matters in para. 10 of
L Mr Blaauw’s affidavit as particulars of the allegations in paras. 15(c), 16(c), L
17(c) and 18(c) of the statement of claim.
M M
N N
Costs orders nisi
O 62. I now turn to costs. Though the plaintiff has succeeded in O
opposing the three appeals, its success is a qualified one. The claims
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against Mrs Balani are all based on dishonest or fraudulent breach of trust,
Q but no particulars are pleaded. They are only contained in the affidavits of Q
Mr Blaauw. This is improper.
R R
S 63. Mrs Balani’s complaints for want of particulars of fraud are S
justified. However, she has taken a wrong move in appealing against the
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Master’s orders. She should have applied for further and better particulars.
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B
64. In the circumstances, I make the same costs order nisi for the B
three appeals that Mrs Balani do pay 50% of the costs of the appeal to the
C C
plaintiff. I also certify the matters fit for one counsel. These costs are to be
D
assessed by me summarily at a 9:30 a.m. hearing to be fixed by the parties D
and be payable forthwith upon assessment.
E E
F F
G G
H (L. Chan) H
Deputy High Court Judge
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Mr Douglas Lam, instructed by Messrs Hogan Lovells, for the Plaintiff
J J
Mr Paul J Carolan, instructed by Messrs Andrew W Y Ng & Co., for the
K 3rd Defendant (in HCA 394/2010 and HCA 395/2010), 5th Defendant (in K
HCA 397/2010)
L L
M M
N N
O O
P P
Q Q
R R
S S
T T
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