REMEDY ASIA LTD v. PATRICK TONG HING CHI AND OTHERS

REMEDY ASIA LTD v. PATRICK TONG HING CHI AND OTHERS

Judge found on balance that Tong remained a de facto director after 28 July 2000 and MAEGL was a shadow director from at least 28 July 2000; the company deliberately under‑reported royalties (massive understatement) and sold assets/supplied related parties at undervalue while insolvent or near insolvency (triggering creditors' duty), conduct was dishonest and in breach of fiduciary duties, s20 Limitation Ordinance applies to primary fraud claims, Remedies: claims under MAHK and Silver Kent Agreements dismissed; claim against Tong and MAEGL for fraudulent/dishonest breach allowed with damages assessed (Tong HK$29,694,615; MAEGL HK$20,251,901); Silver Kent claim and counterclaim dismissed;...

Citation
[2020] HKCFI 398
Parties
Original Plaintiff/assignor: Cyberworks Audio Video Technology Limited (In Compulsory Liquidation); Plaintiff/assignee: Remedy Asia Limited; 1st Defendant (de Jure/de Facto Director Alleged): Patrick Tong Hing Chi; 2nd Defendant (parent Company Alleged Shadow Director): Mei Ah Entertainment Group Limited; 3rd Defendant (subsidiary Defendant): Mei Ah (HK) Company Limited; 4th Defendant (related Company): Silver Kent Technology Limited
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
16 April 2020
Case Number
HCA658/2011
Procedural Posture
Consolidated Civil Actions Concerning Company Insolvency, Directors' Duties and Inter Company Transactions / Judgment Following Full Trial (trial 2 20 March 2020; Judgment 16 April 2020)
Outcome
Judgment entered: plaintiff (Remedy Asia Limited as assignee) succeeds on fraudulent and dishonest breach claims against Patrick Tong and Mei Ah Entertainment Group Limited; claims under MAHK and Silver Kent Agreements dismissed; Silver Kent debt claim dismissed; counterclaim dismissed; damages awarded against Tong...
Legal Topics
De Facto Director, Shadow Director, Fraudulent Breach of Duty, Dishonest Assistance, Equitable Fraud, Inter Company Set Offs, Asset Transfers/sale and Leaseback, Royalty Agreements, Limitation Ordinance Ss20 and 26
Source Language
EN
Company Law Insolvency Directors' Duties Trusts and Fiduciary Duties Civil Procedure/limitation De Facto Director Shadow Director Fraudulent Breach of Duty +6 more

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Parties

Cyberworks Audio Video Technology Limited (In Compulsory Liquidation)

Original Plaintiff/assignor

Remedy Asia Limited

Plaintiff/assignee

Patrick Tong Hing Chi

1st Defendant (de Jure/de Facto Director Alleged)

Mei Ah Entertainment Group Limited

2nd Defendant (parent Company Alleged Shadow Director)

Mei Ah (HK) Company Limited

3rd Defendant (subsidiary Defendant)

Silver Kent Technology Limited

4th Defendant (related Company)

Procedural Posture

Consolidated Civil Actions Concerning Company Insolvency, Directors' Duties and Inter Company Transactions / Judgment Following Full Trial (trial 2 20 March 2020; Judgment 16 April 2020)

Legal Issues

  1. 1 Whether Tong and/or MAEGL were de facto or shadow directors of Cyberworks
  2. 2 What duties were owed to the company and creditors and when they were triggered
  3. 3 Whether the company was insolvent or likely to become insolvent by Q4 1999/31 March 2000

Ratio Decidendi

Judge found on balance that Tong remained a de facto director after 28 July 2000 and MAEGL was a shadow director from at least 28 July 2000; the company deliberately under‑reported royalties (massive understatement) and sold assets/supplied related parties at undervalue while insolvent or near insolvency (triggering creditors' duty), conduct was dishonest and in breach of fiduciary duties, s20 Limitation Ordinance applies to primary fraud claims, Remedies: claims under MAHK and Silver Kent Agreements dismissed; claim against Tong and MAEGL for fraudulent/dishonest breach allowed with damages assessed (Tong HK$29,694,615; MAEGL HK$20,251,901); Silver Kent claim and counterclaim dismissed;...

Court Disposition

Judgment entered: plaintiff (Remedy Asia Limited as assignee) succeeds on fraudulent and dishonest breach claims against Patrick Tong and Mei Ah Entertainment Group Limited; claims under MAHK and Silver Kent Agreements dismissed; Silver Kent debt claim dismissed; counterclaim dismissed; damages awarded against Tong...

Orders

  • Claims under MAHK Agreement (HCA 677/2006) and Silver Kent Agreement (HCA 678/2006) dismissed
  • Claim by Remedy Asia Limited against Patrick Tong Hing Chi for fraudulent and dishonest breaches allowed; damages awarded HK$29,694,615 against Patrick Tong Hing Chi