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Court of Appeal grants SFC $622 million compensation orders against former directors of EganaGoldpfeil (Holdings) Ltd

Issue date: 2021-06-29 17:52:52

The Securities and Futures Commission (SFC) has obtained compensation orders under the Securities and Futures Ordinance (SFO) from the Court of Appeal against three former directors of EganaGoldpfeil (Holdings) Ltd (EHL) following an appeal against the lower court’s decision (Notes 1 to 5).

The three former EHL directors, namely, Mr David Wong Wai Kwong, Mr Peter Lee Ka Yue, and Mr Chik Ho Yin, were ordered to pay, jointly and severally, $622 million as compensation to EHL for the company’s loss of funds as a result of their misconduct and their failure to act in the best interest of EHL.

They were found to have failed to carry out proper enquiries and perform appropriate due diligence before causing or permitting various subsidiaries of EHL to enter into transactions that were not genuine commercial transactions.  The concerned subsidiaries were found by the Court to be mere conduits for the transfer of $622 million from EHL to Peninsula International Ltd, a company owned by the family of EHL’s then chairman, to purchase some of the company’s shares, instead of the purported transactions as recorded in EHL’s internal accounting records.

Wong, Lee and Chik were previously disqualified by the Court of First Instance from being a director and taking part in the management of any listed or unlisted corporation in Hong Kong, without leave of the Court, for a period of six to nine years.

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Notes:

1. EHL was formerly listed on the Main Board of The Stock Exchange of Hong Kong Limited and was ordered to be wound up by the Court on 29 July 2009.
2. Under section 214(2)(d) of the SFO, the Court of First Instance may make orders disqualifying a person from being a director or being involved, directly or indirectly, in the management of any corporation for up to 15 years, if the person is found to be wholly or partly responsible for a corporation’s business or affairs having been conducted in a manner, among other things, involving defalcation, fraud or other misconduct towards it or its members; resulting in its members or any part of its members not having been given all the information with respect to its business or affairs that they might reasonably expect; or unfairly prejudicial to its members or any part of its members.
3. Under section 214(2)(e) of the SFO, the Court has the power to make any other order it considers appropriate, whether for regulating the conduct of the business or affairs of the corporation in future, or for the purchase of the shares of any members of the corporation by other members of the corporation or by the corporation, or otherwise.
4. Please see the SFC’s press releases dated 1 August 2011 and 11 May 2020.  A summary of the SFC’s petition can be found on the SFC website.
5. The judgment is available on the Judiciary’s website (Court Reference: HCMP 1227/2011 and CACV 150/2020).

Source: SFC