YIP KWAI CHOR v. KING FUNG CONTRUCTION WORK CO LTD AND ANOTHER

YIP KWAI CHOR v. KING FUNG CONTRUCTION WORK CO LTD AND ANOTHER

The court found that on the balance of probabilities Lau had misapplied Company funds in several specific series of cheque withdrawals, had wrongfully diverted the West Kowloon subcontract to Brother Eng. in which he had an interest, that the back-to-back site-transfer arrangement resulted in an established claim by the Company against Sing Yip for $3,247,828 but that the Company\'s claimed excess expenditure on the two sites became nil after disallowance of unreliable items; the five payments of $2.5m to Yip were not proven to be recoverable loans; the appointment of Wong and the purported removal of Yip were invalid and the cumulative conduct amounted to unfairly prejudicial conduct...

Citation
YIP KWAI CHOR v. KING FUNG CONTRUCTION WORK CO LTD AND ANOTHER
Parties
Applicant / 1st Defendant: Yip Kwai Chor; 1st Respondent / Plaintiff: King Fung Construction Work Company Limited; 2nd Respondent / 1st Defendant: Lau Kai Yan; 2nd Defendant: Sing Yip Construction Engineering Ltd.
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
12 December 2006
Case Number
HCMP375/2005
Procedural Posture
Company Petition Under Section 168 a Companies Ordinance and Related Civil Action Hca2183/2004 / Judgment (12 December 2006)
Outcome
Petition under s168A allowed on basis of unfairly prejudicial conduct; findings made of misapplication and wrongful diversion; buyout of minority shares ordered in principle; other claims adjusted or dismissed as set out below.
Legal Topics
Unfairly Prejudicial Conduct Under S168 a, Misapplication of Company Funds, Director Removal and Appointment Validity, Back to Back Subcontracting, Share Purchase/valuation as Relief, Reflective Loss Limitation
Source Language
EN
Company Law Shareholder Disputes Fiduciary Duties Contract Law Civil Procedure Unfairly Prejudicial Conduct Under S168 a Misapplication of Company Funds Director Removal and Appointment Validity +3 more

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Parties

Yip Kwai Chor

Applicant / 1st Defendant

King Fung Construction Work Company Limited

1st Respondent / Plaintiff

Lau Kai Yan

2nd Respondent / 1st Defendant

Sing Yip Construction Engineering Ltd.

2nd Defendant

Procedural Posture

Company Petition Under Section 168 a Companies Ordinance and Related Civil Action Hca2183/2004 / Judgment (12 December 2006)

Legal Issues

  1. 1 Whether a 50/50 profit sharing agreement existed between Yip and Lau
  2. 2 Whether Kam Chin Village and Hang Hau projects were assigned to Sing Yip (back-to-back arrangement) and resulting liabilities
  3. 3 Whether five payments totalling $2,500,000 to Yip were personal loans recoverable by the Company

Ratio Decidendi

The court found that on the balance of probabilities Lau had misapplied Company funds in several specific series of cheque withdrawals, had wrongfully diverted the West Kowloon subcontract to Brother Eng. in which he had an interest, that the back-to-back site-transfer arrangement resulted in an established claim by the Company against Sing Yip for $3,247,828 but that the Company\'s claimed excess expenditure on the two sites became nil after disallowance of unreliable items; the five payments of $2.5m to Yip were not proven to be recoverable loans; the appointment of Wong and the purported removal of Yip were invalid and the cumulative conduct amounted to unfairly prejudicial conduct...

Court Disposition

Petition under s168A allowed on basis of unfairly prejudicial conduct; findings made of misapplication and wrongful diversion; buyout of minority shares ordered in principle; other claims adjusted or dismissed as set out below.

Orders

  • Findings that Lau misapplied Company funds in respect of specified cheque-series and related payments and that he wrongfully diverted the West Kowloon subcontract to Brother Eng.
  • Company\'s claim against Sing Yip established in the sum of 3,247,828 HKD.