Mason Group Holdings Ltd v Tam Joseph Wing On (譚榮安) [2024] 1 HKLRD 601, [2023] HKCFI 3305

Jeff Yau represented the 4th defendant in Mason Group Holdings Ltd v Tam Joseph Wing On (譚榮安[2024] 1 HKLRD 601, [2023] HKCFI 3305.

P1-2 (Ps) belonged to the same group of companies. Ps’ claim concerned two lots of shares the group had purchased in tandem from D5 and D6 respectively. The sales and purchases of the said shares were to effectively acquire substantive control of a company, C. Ps claimed that D1-6 (Ds) had, at the time of the subscription of the two lots of shares by the subsidiary of D5 and the predecessor of D6, conspired together and formulated an agreement and/or arrangement by unlawful means to carry out a series of transactions with the aim of selling the said shares at “grossly inflated prices” for their own financial benefit. Ps pleaded that D1, being a director of C, facilitated and arranged the share subscriptions; and D2, being an officer of Ps’ group at the time, breached fiduciary and common law duties as he had, inter alia, failed to declare his personal interest in one lot of the shares and failed to disclose to Ps D1’s interest in the other lot of share and made misrepresentations as to the valuation of the shares and identities of the sellers. A condition precedent of the two sales was certain corporate restructuring which entailed, inter alia, C’s acquisition of another group of companies, B. Ps pleaded that C’s acquisition of B was part and parcel of the alleged conspiracy in that one of the objectives of the conspiracy was to generate monies from the subscription of the two lots of shares, which would not have been generated had it not been for the conspiracy and therefore the subscription proceeds were “derived from” the wrongful conduct of D1-6; and D1-3 caused C to enter into a share purchase agreement with D4 and other shareholders of B to utilise the subscription proceeds to acquire B. Ps pleaded that D4, as founder and shareholder of B, knew of or turned a blind eye to D2’s wrongful conduct including the alleged breaches of duties. Ps also relied upon certain email communications between D2 and D4, from which was alleged that knowledge on D4’s part and the execution of the share purchase agreement for B as overt acts carried out by D4. D4 applied for, inter alia, striking out of such part of Ps’ statement of claim as against him. On the other hand, Ps applied for leave to amend the statement of claim.

Held, allowing D4’s application for striking out, dismissing Ps’ application for amendment, ordering such part of the statement of claim as against D4 be struck out, and dismissing Ps’ action against D4, that:

  • (1) The elements to be pleaded and proved on a claim of conspiracy to injure were summarised in Chan Wai Keung Lawrence v Au Chi Man Albert. In relation to the third element, namely that the acts were carried out pursuant to the agreement and the stated intention, the gist of the tort of conspiracy was not the conspiratorial agreement alone but that of the agreement plus the overt act causing damage. Allegations of knowledge, common purpose and intention could not alter the lack of a proper plea of overt act. The pleader had to plead at least one overt act which was the act of all of the alleged conspirators or, failing that, a number of overt acts which included at least one act on the part of each conspirator (Chan Wai Keung Lawrence v Au Chi Man Albert [2021] HKCFI 2096 applied). (See para.13.)
  • (2) Concerning the two sales, all the so-called overt acts pleaded were the individual acts of D2 and D1 – on D2’s part were D2’s breaches of fiduciary and common law duties; on D1’s part were his facilitation and arrangement in the two share subscriptions and the sales of one lot of the shares among companies he controlled or owned. There was not one act pleaded which was participated by them together, or by any or both of them with another defendant. Notably and importantly, it was not pleaded that D1 had any form of knowledge that D2 would commit, was committing or had committed any of the alleged breaches of duties. D1’s involvement was otherwise most normal and was well expected, as he was the founder, director and main shareholder of C. Unless it was pleaded that D1 facilitated the share subscriptions at least with some form of such knowledge, Ps could not even begin to say that such facilitation was an overt act on his part showing that the alleged conspiratorial agreement had been made. In the result, concerning the two sales as part of the alleged conspiracy, there was simply no overt act pleaded (Aktieselskabet Dansk Skibsfinansiering v Wheelock Marden & Co Ltd [1994] 2 HKC 264, Chan Wai Keung Lawrence v Au Chi Man Albert [2021] HKCFI 2096 applied). (See paras.13-14, 58-65.)
  • (3) Conspicuously and importantly, in relation to the two sales, there was no act pleaded, overt or otherwise, that involved D4. In relation to the emails between D4 and D2, even assuming in favour of Ps that they showed D4 had the alleged actual or constructive knowledge of D2’s “dual roles”, his conflict of interest with Ps, and even his breaches of fiduciary and other duties, such knowledge was not an act, and of itself could not be a proper plea of overt act. Ps also failed to show how such knowledge and the execution of the share purchase agreement for B, which by itself was a commercial transaction on which Ps otherwise had no complaint, was carried out more than in furtherance of the acquisition of B as the main part of the condition precedent of the two sales, in that they would show that the alleged conspiratorial agreement to employ unlawful means to “inflate” the prices of the sales were entered into by, and implemented on the part of, D4 with the other Ds. It was impossible for such inference to be drawn based on Ps’ pleaded case. (See paras.66-72, 74.)
  • (4) It was plain and obvious that there was no reasonable cause of action of unlawful means conspiracy against D4, and such claim against D4 should be struck out. Ps’ proposed amendments of the statement of claim could not cure such defect. As unlawful means conspiracy was the only cause of action claimed against D4, upon it being struck out, Ps’ action against D4 was also dismissed. (See paras.74-79.)

[The above is excerpted from the headnote to the report in HKLRD.]


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