LAM LEUNG YAU v. HK-ASIAN SECURITY LTD AND OTHERS

HCMP 94/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 94 OF 2004

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D E C I S I O N

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1. This is an originating summons issued by Lam Leung Yau on 12 January 2004 under section 114B of the Companies Ordinance, Cap. 32. Mr Lam, the plaintiff, is the 40% shareholder of HK-Asian Security Limited ("the Company"), the 1st defendant herein. Mr Yu Kwai Sun and Mr Wong Yuk Kei, who between them hold the remaining 60% of the shares, are the 2nd and 3rd defendants. The 2nd and 3rd defendants are the only directors of the Company.

2. The originating summons was poorly drafted. It is not necessary to concern myself with the exact terms, as I am not going to grant relief, for the reasons to be given. Suffice it to say that the application is for an order that an extraordinary general meeting of the Company be convened to consider the proposed resolutions set out in the schedule to the originating summons with consequential directions to be given for the holding of the meeting, including a direction that one person present in person or by proxy be deemed to constitute a quorum for such meeting.

3. Much of the evidence filed in the application has little or no relevance to the central issues, which are whether the jurisdiction to grant relief under section 114B is triggered, and if so, whether discretion should be exercised in favour of granting relief. I am not concerned with matters like whether the plaintiff had discharged his duties properly when he was employed by the Company, whether he had divulged confidential information to a company which subsequently brought proceedings against the Company, whether he was guilty of any other misconduct, or whether there was any agreement or understanding that the plaintiff was to be appointed a director when he became a 40% shareholder. It should be clear to everyone that the last matter, which is in dispute, cannot possibly be resolved in this application.

4. Under section 114B, the jurisdiction is triggered where it is shown "if for any reason it is impracticable to call a meeting of a company in any manner in which meetings of that company may be called". The question necessarily raised by the word "impracticable" is merely this: having examined the circumstances of the particular case, as a practical matter, can there be any doubt that the desired meeting can be called? (Re El Sombrero Ltd [1958] Ch 900 at 904)

5. The relevant circumstances of this case are as follows.

6. Before the originating summons was issued, the plaintiff purported to invoke section 113 to requisition an extraordinary general meeting. Under section 113(1), the directors are obliged to convene an extraordinary general meeting on the requisition of members holding not less than 1/20 of such of the paid-up capital as at the date of the deposit of the requisition carries the right to vote. It is a requirement under section 113(2) that the requisition must be "deposited at the registered office of the company". If the directors do not within 21 days from the date of the deposit of the requisition proceed to convene the extraordinary general meeting, the requisitionists may themselves convene the meeting within the time stipulated under section 113(3).

7. Here, the requisition dated 22 September 2003 signed by the plaintiff was enclosed to a covering letter of the same date from the plaintiff's solicitors to the solicitors acting for the Company and sent to the address of the Company's solicitors by fax and by post. It was not deposited at the registered office of the Company in Bonham Strand East. After receipt of the requisition and on 20 October 2003, the Company's solicitors wrote to the plaintiff's solicitors drawing the latter's attention that the requisition was not "properly served according to the requirements of section 113" and that the requisition is therefore "not valid".

8. Instead of rectifying this, the petitioner's solicitors wrote to the Company's solicitors on 11 November 2003 making reference to the other side's letter of 20 October 2003 and went on to say that it was alleged therein that the "[the Company's solicitors] had no instructions to acknowledge receipt of [the plaintiff's] requisition". The plaintiff's solicitors then requested the Company's solicitors to return the original of the requisition.

9. The Company's solicitors replied on the same day reiterating that the requisition was not properly served according to the requirement of section 113. Further, they had not stated in their letter of 20 October 2003 that they had "no instructions to acknowledge receipt of [the Plaintiff's] requisition", as alleged by the plaintiff's solicitors in their letter dated 11 November 2003. That is entirely correct. I am wholly unable to see how that statement can be turned into some kind of admission, as subsequently contended by the plaintiff's solicitors, that the Company's solicitors had instructions to accept service of the requisition dated 22 September 2003 on behalf of the Company.

10. On 26 November 2003, the plaintiff's solicitors wrote to the 2nd and 3rd defendants enclosing a notice of the plaintiff as the requisitionist to convene an extraordinary general meeting on 15 December 2003, asserting entitlement to rely on section 113(3). The Company's solicitors replied by letter on 13 December 2003 that the 2nd and 3rd defendants would not attend the extraordinary general meeting because there was no proper service of the requisition and no entitlement to rely on section 113(3).

11. This originating summons was then issued in January 2004.

12. The application fails at the first hurdle. It is not impracticable for an extraordinary general meeting to be held. Had the plaintiff served his requisition properly by depositing this at the registered office, there would have been no challenge to the service of the requisition. The directors would have been obliged to convene the meeting in accordance with section 113(1) and if they had failed to do so, the plaintiff would be entitled to convene the meeting himself under section 113(3). It is entirely the plaintiff's fault in not complying with the requirement as to service of the requisition in section 113(2). That the requisition had come to the notice of the directors is irrelevant, as the plaintiff would have no right to convene a general meeting as a requisitioning shareholder unless he had complied with the requirements in section 113(2). Order 2 rule 1 of the Rules of the High Court which gives power to the court to cure irregularities where there is non-compliance with the Rules of the High Court has no application to this situation at all.

13. As the jurisdiction of the court under section 114B is not engaged, it is not necessary to consider whether I would have exercised my discretion in favour of granting relief.

14. I therefore dismiss the originating summons.

15. As to costs, I see no reason why I should depart from the usual rule that costs should follow the event. I order the plaintiff to pay the costs of the defendants in this application.

16. The defendants also seek an order for costs on an indemnity basis. Having heard counsel's submissions, I am not persuaded that the circumstances here are such to justify awarding costs against the plaintiff on a higher scale. The costs awarded to the defendants would be taxed on a party and party basis if not agreed. I disallow the costs incurred by the defendants in the preparation and filing of more than one affirmation in opposition on 16 February 2004 and on 29 April 2004 as the additional affirmations are virtually identical in content to one of the affirmations put in and the work done is wholly superfluous and unnecessary.