Styland founder ordered to pay firm HK$85m
In a landmark ruling, the High Court yesterday ordered the founder and former chairman of developer Styland and his wife to pay HK$85 million to the company as compensation for the losses incurred because of their misconduct.
The ruling also marks a first for the Securities and Futures Commission in successfully pursuing compensation for a company from its directors for misconduct.
Delivering the judgment, Mr Justice Aarif Barma said he accepted the charges brought by the commission in 2008 and ruled that Kenneth Cheung Chi-shing and Yvonne Yeung Han-yi must compensate the company for their misconduct. Yeung was a former executive director of Styland.
The judge also barred the couple from holding any position as a company director for 12 years - the longest ever such ban in Hong Kong. Under the law, the maximum period for such a ban is 15 years.
The SFC said Cheung and his wife had led Styland, a property and infrastructure investment company, to enter a number of transactions in 1999 and 2000 that were not in the company's interests but benefited the couple.
Barma said he accepted the SFC's charges that significant portions of the transactions had 'found their way into the pockets of Kenneth Cheung and Yvonne Yeung' and that these deals 'constitute misconduct or misfeasance', causing 'unfair prejudice' to Styland's shareholders.
The SFC said Cheung had gained HK$79 million from several deals while Yeung had gained HK$6.95 million through connected transactions without the approval of shareholders.
Judge Barma also barred former director Miranda Chan Chi-mei from taking a board seat for seven years and former director Steven Li Wang-tai for six years. They were directors of Styland when the company conducted the deals in question.
'Companies and shareholders may lose money legitimately for all sorts of reasons but misconduct by directors is not one of those reasons,' said Mark Steward, an executive director of the SFC.
'These directors flouted their responsibilities, abused shareholders' funds and then sought to prevent steps being taken to make them accountable. The compensation order means they must now account for those shareholders' funds that were misappropriated, and the lengthy disqualification periods send a deterrent message.'
Styland resumed trading in its shares in December last year after being suspended in April 2004 as the stock exchange asked the firm to make sufficient disclosure on certain deals before it could resume trading.
The attributable loss Styland reported for the six months to September last year, in HK dollars