SMART CONCEPT GROUP HOLDINGS LTD v. HUNG KIN FAI TOMMY AND ANOTHER

HCMP 922/2021

[2022] HKCFI 500

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 922 OF 2021

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BETWEEN

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D E C I S I O N

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1.  I have before me an originating summons issued by a shareholder of the Company seeking the following orders:

(1) The 2^nd Respondent be directed, and the 1^st Respondent be directed to procure the 2^nd Respondent, to hold a general meeting of the company for the financial year 2020 within 28 days from the date of the order to be made (the “General Meeting”);

(2) The 1^st Respondent be directed to lay before the 2^nd Respondent in the General Meeting a copy of the reporting documents, including the financial statements, the directors’ report and the auditor’s report, for the financial years of 2019 and 2020;

(3) The 2^nd Respondent be directed, and the 1^st Respondent be directed to procure the 2^nd Respondent, to send a copy of the reporting documents, including the financial statements, the directors’ report and the auditor’s report, for the financial years of 2019 and 2020 to every member including the Applicant at least 21 days before the date of the General Meeting.

2.  The 1^st Respondent, Mr Hung, appeared in person at the first hearing of the originating summons before me on 23 July 2021. On that occasion I tried to deal with the matter in a practical way. It appears that Mr Hung is either the only director of the Company or is the only person who is a director who has any interest in its affairs. I asked Mr Hung whether he was willing to take action to produce audited financial accounts and the holding of a general meeting or, if he felt this was not something he could deal with, he wished to resign as a director.

3.  In July, Mr Hung told me that he wanted to try deal with the accounts himself. When the originating summons came back on before me today Mr Hung’s position had changed. He has decided that this is all too difficult and he wishes to resign. Things seem to have become complicated because in an effort to work out how to resign, Mr Hung spoke to the Companies Registry helpline and was left with the impression that if he is the Company’s sole director he could not resign. If he was told this that information was wrong. He can resign pursuant to section 464 of the Companies Ordinance (Cap 622). The fact that this may result in the Company being in breach of the Ordinance because it does not have a director, is not of itself a bar to his resignation. Mr Hung tells me that he will, therefore, write to the Company today informing them that he will resign with immediate effect.

4.  Turning to the substance of the originating summons, it seems to me that the thinking behind its formulation is misconceived. The court can order pursuant to section 570 of the Ordinance that a general meeting is convened. It does not seem to me that pursuant to the sections relied on by the Applicant, namely, sections 429, 430, 435 and 610 of the Ordinance, the court can or should be making orders directing a particular director to ensure that the Company complies with the obligations to convene an annual general meeting and put audited financial statements before the Company at that annual general meeting. That would require proceedings to be commenced for unfair prejudice relief. Even if that were done I anticipate that the way in which matters would proceed in most cases would ultimately result in that kind of relief not being considered either appropriate or an effective resolution of the underlying dispute.

5.  The way in which I propose to proceed as I have already indicated is to make an order pursuant to section 570 for a general meeting to be convened at which the Applicant can reconvene the board and then take such steps as it considers appropriate to have audited financial statements produced. I have told Mr Lee who appeared for the Applicant, that he should go away and formulate the precise terms of the order to be made after he has discussed with his client where and when the general meeting should take place and who his client proposes is voted on to the board. That matter can be dealt with on paper.

6.  So far as costs are concerned, I think the appropriate order is that the costs of the application are paid out of the asset of the Company. If the application had been made in the form which I consider to be appropriate, I anticipated it would have been very straightforward and possibly unopposed.

7.  I will, therefore, assess the costs on that basis. I will order that the costs are assessed on a summary basis at HK$35,000 and that they are paid out of the assets of the Company forthwith.