KWOK TAK MING JOSEPH v. COSMO-TECHNOLOGY LTD AND OTHERS

HCCW 42/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 42 OF 2008

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D E C I S I O N

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1.    This is an ex parte application for interim injunction by a petitioner in a petition presented under section 168(A) of the Companies Ordinance, Cap. 32 and for a winding-up order under section 177(1)(f).  The papers were lodged on 29 January 2008, I directed the application to be heard at 9:30 am on 30 January 2008, in order that notice of the application would be given to the 1^st to 3^rd respondents.

2.    I understand from the petitioner’s counsel that a covering letter was faxed to the office of the 1^st respondent yesterday before 5:00 pm and that the 2^nd and 3^rd respondents were personally served with the papers sometime after 5:00 pm.  None of the respondents have appeared today.

3.    The 1^st respondent is the company in question, Cosmo-Technology Limited (“the Company”).  The petitioner, the 2^nd and 3^rd respondents are the only shareholders and directors.  The 2^nd and 3^rd respondents together hold 80% of the shares.

4.    The injunctions sought are in these terms:

(1)	the 2nd and 3rd respondents be restrained up to and including the adjourned hearing of an inter partes summons to be issued or further order of the court, from voting in favour of a resolution at an extraordinary general meeting of the Company scheduled for 30 January 2008 or any other resolution to the effect of removing the petitioner from the board of the Company;
(2)	the petitioner be given full access to inspection and be allowed to make copies of all books of board minutes and books of account for tax years commencing January 2000 up to today; and
(3)	the 1st to 3rd respondents do preserve and keep all the books, accounts, journals, vouchers and other records of the Company.

5.    On 27 November 2007, the petitioner received notice of an extraordinary general meeting to be convened on 19 December 2007 to remove him as a director.  That general meeting was not convened, for a reason that is not necessary to go into.

6.    On 21 December 2007, the petitioner received notice of a board meeting on 22 December 2007 to convene an extraordinary general meeting to pass a resolution to remove him as a director.

7.    On 2 January 2008, he received notice of an extraordinary general meeting to be held on 30 January 2008 to pass a resolution to remove him as a director.

8.    Notwithstanding ample notice was given to the petitioner of various meetings to be convened for the purpose of removing him as a director, the papers for this application were lodged only on 29 January 2008, the day before the scheduled meeting.  I am given to understand by his counsel that he was adopting a wait-and-see attitude to see if the matter could be resolved satisfactorily without going to court.  I do not consider that a satisfactory explanation as to why the papers were lodged only the day before the scheduled meeting, or why the application should be made ex parte.

9.    I have considered the petition.  A lot of the complaints relate to a company incorporated in Japan and a company owned by the petitioner and his wife.  These complaints are not strictly relevant to the allegations to found a petition to wind up the Company or for relief under section 168A.

10.    The complaints really began with the 2^nd respondent’s attempt to buy out the petitioner’s shares.  Their relationship only turned sour in 2007.  In gist, the petitioner alleged that the 2^nd respondent attempted to force him to sell his shares at an undervalue.  To carry out the plan, the 2^nd respondent sought to remove the petitioner as a director to prevent him from investigating into the financial affairs of the Company, so the petitioner would be forced to sell his shares cheaply.

11.    From mid December 2007, the petitioner demanded inspection of books and records and he was allowed inspection to some extent.  He claimed that he discovered alarming items when he went through the accounts from 2002 to 2006.  These items relate to staff costs other than those of the directors, key management personnel remuneration, rental on leased property and commitment under operating lease.

12.    In the petition, the principal relief sought is an order that the petitioner’s shares be purchased at a fair value, alternatively that the Company be wound up.  It is clear who should stay in the Company.  The petitioner is not asking to stay to run the Company.  He is content that his shares be purchased by the respondents, provided that this is done at a fair value.

13.    In the reliefs in the petition, he also seeks a declaration that the board meeting or general meeting was not properly convened and that any resolution purportedly passed to remove him as a director be declared invalid.  In addition he seeks an injunction to restrain the 2^nd and 3^rd respondents from voting in favour of the resolution to remove him as director.

14.    An injunction is a discretionary remedy.  In view of the principal relief sought, i.e. an order to buy out the petitioner’s shares at fair value or an order to wind up the Company, I cannot see how it would be appropriate to grant an injunction as sought under the powers in section 168A(2), even if the petitioner were to succeed on the petition at the trial.

15.    As it is unlikely that an injunction would be granted at the trial, I do not think it would be appropriate to grant an interim injunction in similar terms, quite apart from the fact that there is no allegation in the petition that the petitioner has a right not to be removed as a director without just cause.

16.    I decline to grant an interim injunction to interfere with the way the 2^nd and 3^rd respondents are to exercise their right to vote as shareholders.

17.    Other injunctions sought relate to the inspection of books and records of the Company by the petitioner and the preservation of these records.  I have considered the correspondence exchanged in December 2007 and January 2008 and the petitioner’s evidence on this.  In my view, he has not made out a case for injunctive relief.  It does not appear to me likely that the documents would be destroyed or concealed.

18.    I have no reason to think that the relevant documents would not be disclosed by the respondents in due course in the proceedings, now that a petition has been presented against the respondents.

19.    For the above reasons, I dismiss the petitioner’s application for an interim injunction.