Ming Siu Hung and Others v J F Ming Inc. and another
| Jurisdiction | UK Non-devolved |
| Judge | Lord Briggs |
| Judgment Date | 14 January 2021 |
| Neutral Citation | [2021] UKPC 1 |
| Docket Number | Privy Council Appeal No 0092 of 2017 |
| Court | Privy Council |
| Date | 14 January 2021 |
[2021] UKPC 1
Lady Black
Lord Briggs
Lady Arden
Lord Sales
Lord Burrows
Privy Council Appeal No 0092 of 2017
Hilary Term
From the Court of Appeal of the Eastern Caribbean Supreme Court (British Virgin Islands)
Appellants
Christopher Parker QC
Ian Mann
Paula Kay
(Instructed by Harney Westwood & Riegels LLP (British Virgin Islands))
Appellants:-
(1) Ronald Ming Siu Hung
(2) Bertha Shaw Shiu Kuen
(3) Ming Shiu Tong
Respondents:-
(1) J F Ming Inc
(2) Lawrence Ming Shui Sum
2 nd Respondent
Paul Chaisty QC
Nigel Meeson QC
Richard Evans
(Instructed by Conyers Dill & Pearman and Sinclair Gibson LLP)
Heard on 26 November 2020
By this appeal to the Board the appellants, three siblings in the Ming family, seek to reinstate the order made by Leon J in the British Virgin Islands on 16 August 2016 that their brother Ming Shui Sum, Lawrence, the Second Respondent (“Lawrence”) purchase their shares in the First Respondent company JF Ming Inc (“the Company”) at a price to be determined by the court. That order was made at the conclusion of unfair prejudice proceedings, following a finding (which is no longer in dispute) that Lawrence had conducted the affairs of the Company in a manner which was oppressive, discriminatory and unfairly prejudicial to the appellants as shareholders within the meaning of section 184I of the BVI Business Companies Act 2004. This was mainly by his failure to ensure that they were provided with financial information about the Company pursuant to their right to be given such information enshrined in article 120 of the Company's Articles of Association, but also because he had abused his voting powers as majority shareholder by seeking to have their right to financial information permanently removed.
By its order made on 28 June 2017 the Court of Appeal (Blenman, Webster and Gonsalves JJA) set aside the Judge's order for a buy-out, but upheld both his findings of unfairly prejudicial conduct, his order that the rights to information in article 120 be fully reinstated and that the financial information be provided. The Court of Appeal considered that it was appropriate to exercise the remedial discretion afresh because of what it regarded as errors of principle in the judge's reasoning. The relatively short question which is decisive of this appeal to the Board is whether the judge made the errors identified by the Court of Appeal. If he did not, then the Court of Appeal should not have taken it upon itself to re-exercise the discretion as to remedy, and the judge's order for a buy-out should stand. But it is first necessary to summarise the facts.
The late Ming John Fook was a successful Hong Kong businessman who had seven children, including the appellants and Lawrence. In 1991, as part of estate planning late in his life, he established the Company as the vehicle for the family ownership of his by then substantial property development business in Hong Kong. He gave each of his children 1,000 shares in the Company. Unknown to the other siblings he also gave a further 10,000 shares in the Company to Lawrence who, alone among the children, had helped him build up the business. When Lawrence revealed the existence of these shares to his siblings in response to their attempt to take over control of the Company after their father's death in December 1992 there ensued protracted litigation in Hong Kong about the validity of that gift. After losing in the lower courts, Lawrence was ultimately successful before the Hong Kong Court of Final Appeal, in May 2006. From then on, Lawrence has been the undisputed majority shareholder in the Company, and in sole control of its affairs as its only director.
Article 120 of the Company's Articles of Association required the directors of the Company to furnish each of the company's shareholders annually with a profit and loss account and a balance sheet for the Company, unless that entitlement was waived by a members' resolution. Lawrence provided none of that financial information to his minority shareholder siblings from his resumption of control of the Company, for any year from 2006, until the judge's order that he should do so was affirmed by the Court of Appeal in 2017.
The appellants did not protest about not being provided with that information until late in 2013, when the second appellant sought it, unsuccessfully, in connection with a possible sale of her shares to Lawrence. In 2014 all the appellants sought it, under threat of proceedings if not provided. The other siblings had by then sold their shares to Lawrence.
Lawrence's response was not to provide that information, but to use his majority shareholding to pass resolutions waiving the shareholders' entitlement under article 120, both for the past and for the future. Thereafter the appellants petitioned under section 184I, initially seeking only an order for the provision of the requisite information and the setting aside of the waiver resolutions. Lawrence's defence, supported by his own witness statement and the submissions of his counsel, included the assertion that, since the appellants had merely been given their shares and had never worked for the Company or in the underlying businesses, they had no reason to expect any monetary return on their shares, so that they suffered no unfair prejudice by being denied the financial information prescribed by article 120. Further he maintained that the appellants had waived their rights to financial information by not asking for it between 2006 and 2013. Lawrence also alleged misconduct by the appellants when briefly in control of the Company before 2006. In response, by a late amendment to their pleadings, the appellants alleged financial misconduct by Lawrence prior to 2006 and sought for the first time a buy-out of their shares, by Lawrence.
A split trial was directed, with liability and the form of remedy to be dealt with first, with any question of valuation of shares to follow, if necessary. The liability trial took place over seven days between October 2015 and May 2016, following which Leon J delivered a lengthy reserved judgment in August 2016. Lawrence had provided evidence in the form of a witness statement, but illness prevented him from attending for cross-examination. The judge accepted his evidence “for what it was” and did not treat it as being of less weight than it would have carried after cross examination.
The judge found that both the persistent refusal to provide the financial information in and after 2013 and the passing of the waiver resolutions designed to deprive the appellants of the right to receive it amounted to unfairly prejudicial conduct. He described the deliberate failure to provide the financial information as “oppressive, unfairly discriminatory and unfairly prejudicial” (para 145), as contrary to commercial morality (para 158) and as having been done for the improper purpose of benefiting himself by depriving the appellants of information to which they were entitled (para 171). He described the waiver resolutions as having been motivated by Lawrence's “desire to take advantage of the claimants' lack of information” about the affairs of the Company (para 156) and done “in a manner designed to inflame the situation between himself and the claimants” (para 162). Following the rejection by the Court of Appeal of Lawrence's challenge to the ruling of unfairly prejudicial conduct these serious findings against him, reached by the judge after a full trial, stand unchallenged before the Board.
The judge approached his consideration of the appropriate remedy from a clearly expressed perspective that, on the facts found by him, he had a broad choice between one which would merely compel Lawrence to provide the prescribed financial information and one which, in addition, would deal fully with what he found would be a likely continuation of unfairly prejudicial conduct by Lawrence in the future. He concluded that the best that could be achieved, in the legitimate interests of all the parties (see eg para 215), was by ordering a buy-out of the appellants' shares. Although no substitute for reading the judgment in full, the following extract best summarises the core of his reasoning:
“There is real reason for concern, based on all that has occurred, that the Second Defendant will not serve as sole director of the Company without recurrences of oppressive, unfairly discriminatory and unfairly prejudicial conduct towards the claimants.
His misguided beliefs on matters of shareholders' rights and his attitudes towards the claimants as minority members are too engrained. His patterns of conduct in defending the indefensible, his hardball tactics, his repetition in his evidence of those beliefs and attitudes make it abundantly clear to this court that a Court-ordered buyout is needed.
The reasons include, first, the Second Defendant's completely unjustifiable failure to provide the Financial Statements over many years, even when asked by the Second Claimant and then all the claimants, and even when he had access to them in discussions with the Second Claimant about an acquisition of her shares (as he did in the 2006–2007 acquisitions); and second, the Second Defendant's long and strongly-held misguided perspective that the claimants are not entitled to the economic benefits of their shares as they were given the shares and as they did not work to build the Company, as did the Second Defendant.
The court has no confidence that the Second Defendant, as sole director, will comply with his obligations to the claimants, or will cause the Company to comply with its obligations to them as members (albeit minority members) of the Company.” (paras 205–208)
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