SECURITIES AND FUTURES COMMISSION v. LAU CHI YUEN JOSEPH AND ANOTHER

SECURITIES AND FUTURES COMMISSION v. LAU CHI YUEN JOSEPH AND ANOTHER

On the balance of probabilities the Court found that Joseph Lau directed and controlled Big Good/Frankie Ma as his nominees, financed the acquisition in substantial part, orchestrated resale to Luxey at an inflated price and failed to disclose his interest; those facts established breaches of fiduciary duties (good faith, proper purpose, no-conflict, no-secret-profit, disclosure) and contraventions of s.214(1)(b),(c) and (d). Eric Chung, as CEO and compliance officer, failed to make reasonable enquiries, to report red flags and to ensure due diligence and thereby breached his duty of care and engaged in conduct falling within s.214(1)(b) and (d). The VSA Announcement and Circular were...

Citation
[2023] HKCFI 1346
Parties
Petitioner: Securities and Futures Commission; 1st Respondent: Lau Chi Yuen Joseph; 2nd Respondent: Chung Man Wai
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
22 May 2023
Case Number
HCMP239/2019
Procedural Posture
SFO S.214 Petition (disqualification) / Final Judgment
Outcome
Petition allowed in part: findings of breaches of directors' duties and of s.214(1)(b),(c),(d) against both respondents; disqualification orders made and costs awarded to SFC.
Legal Topics
Director Disqualification, Misfeasance, Conflict of Interest, Secret Profit, Non Disclosure, Misconduct Under S.214 SFO
Source Language
EN
Company Law Securities Regulation Fiduciary Law Corporate Governance Director Disqualification Misfeasance Conflict of Interest Secret Profit +2 more

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Parties

Securities and Futures Commission

Petitioner

Lau Chi Yuen Joseph

1st Respondent

Chung Man Wai

2nd Respondent

Procedural Posture

SFO S.214 Petition (disqualification) / Final Judgment

Legal Issues

  1. 1 Whether respondent Joseph Lau used nominees (Big Good and Frankie Ma) to acquire Ratio and resell to Luxey as part of a scheme
  2. 2 Whether Joseph Lau breached fiduciary duties (good faith, proper purpose, no conflict, no secret profit, disclosure)
  3. 3 Whether respondent Eric Chung breached duty of reasonable care, skill and diligence

Ratio Decidendi

On the balance of probabilities the Court found that Joseph Lau directed and controlled Big Good/Frankie Ma as his nominees, financed the acquisition in substantial part, orchestrated resale to Luxey at an inflated price and failed to disclose his interest; those facts established breaches of fiduciary duties (good faith, proper purpose, no-conflict, no-secret-profit, disclosure) and contraventions of s.214(1)(b),(c) and (d). Eric Chung, as CEO and compliance officer, failed to make reasonable enquiries, to report red flags and to ensure due diligence and thereby breached his duty of care and engaged in conduct falling within s.214(1)(b) and (d). The VSA Announcement and Circular were...

Court Disposition

Petition allowed in part: findings of breaches of directors' duties and of s.214(1)(b),(c),(d) against both respondents; disqualification orders made and costs awarded to SFC.

Orders

  • Joseph Lau is disqualified for 8 years from acting as director, liquidator, receiver or manager or being concerned in management of any listed or unlisted company in Hong Kong without leave of the court
  • Eric Chung is disqualified for 5 years from acting as director, liquidator, receiver or manager or being concerned in management of any listed or unlisted company in Hong Kong without leave of the court