BRAVE VENTURE LTD v. XINHUA NEWS MEDIA HOLDINGS LTD AND OTHERS

CAMP 42/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 42OF 2017

(ON AN INTENDED APPEAL FROM HCMP NO 2267 of 2017)

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REASONS FOR JUDGMENT

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Hon Lam VP (giving the Reasons for Judgment of the Court):

1.  On 19 October 2017, after hearing submissions from Mr Coleman SC, we dismissed the Plaintiff’s ex parte application. We now give brief reasons for our decision.

2.  The matter came before us as an urgent application for leave to appeal against the decision of Deputy High Court Judge Kent Yee on 18 October 2017.  By that decision the judge refused to grant ex parte relief to the Plaintiff to restrain the Defendants from holding a general meeting of the 1^st Defendant, a listed company, on 20 October 2017. 

3.  In the Decision of 18 October 2017, the judge set out the factual background to the application.  We have read that Decision together with the Reasons for Decision of M Chan J (in a related matter) on 18 September 2017.  We shall not repeat such background in this judgment.  In a nutshell, the Plaintiff alleged that the Defendants wrongfully attempt to adjourn several resolutions for the election of directors at the general meeting on 29 September 2017.  The Plaintiff alleged that the adjournment was invalid and that its representatives continued with the meeting at another venue (with a substantial number of shareholders not taking part[1]) despite the purported adjournment and at such Continued Meeting voted on the resolutions.  The Plaintiff’s case is that such resolutions were valid and binding on the company and the purported adjourned meeting to be held on 20 October 2017 to consider such “adjourned resolutions” could not have any legal effect.  On the other hand, the Defendants did not accept the validity of the Continued Meeting and the resolutions passed there.

4.  We were informed by Mr Coleman at the hearing that the papers had been served a few hours before the hearing on the Defendants.  It was thus an ex parte application on notice, as it had been in the court below.  The Defendants did not appear at the hearing.

5.  As we said at the beginning of the hearing, the more appropriate route to have the matter brought before us is to make a renewed application for ex parte relief under Order 59 Rule 14(3).  The appeal route, though theoretically viable, is much more cumbersome.  Mr Coleman told us the Defendants were aware that the Plaintiff would be asking for substantive relief at the urgent hearing instead of merely seeking leave to appeal as such course was alluded to in the Certificate of Urgency. 

6.  In the circumstances, we decided to proceed as if the application before us was a renewed application for ex parte relief.

7.  Having given careful consideration to the submissions of Mr Coleman, we came to the conclusion that this is not a proper case for granting ex parte relief, particularly relief which would interfere with the holding of a general meeting by the company. 

8.  Ex parte relief should only be granted in exceptional circumstances because the court usually should give an opportunity to all parties to be heard before granting any relief.  In the present instance, the Plaintiff sought to justify proceeding ex parte on the ground of urgency as the meeting was to be held on 20 October. 

9.  However, we do not see any irreversible prejudice to the Plaintiff even if the meeting of 20 October were to be held. The Plaintiff could still challenge the validity of that meeting by legal proceedings.  In fact, given that the Defendants did not accept the resolutions passed at the Continued Meeting, it seemed to us that legal proceedings to adjudicate on the position are inevitable.  If resolutions were passed at the meeting of 20 October, it may be that the validity of such resolutions would also be the subject of litigation.  In that event, we reckon that the main ground for challenging the validity of the resolutions of 20 October would be that the same agenda items had already been resolved by the resolutions passed at the Continued Meeting.  Hence, to that extent, the issue would be the same.

10.  Mr Coleman submitted that the Plaintiff could also challenge the validity of the 20 October resolutions simply by reference to the invalid adjournment of the meeting of 29 September 2017.  With respect, whilst we agreed with the judge that the Plaintiff may have a strong case on challenging the validity of the purported withdrawal of the agenda items from the meeting by the Board, it does not necessarily follow that the convening of the meeting of 20 October is invalid.  There is scope for argument that irrespective of the validity of purported termination of the meeting on 29 September 2017 and the references to adjourned meeting and adjourned resolutions in the notices, the meeting of 20 October 2017 could be validly convened and any mistaken characterization of the meeting (as an adjourned meeting) could be cured by the principle of irregularity, see Lam Hon Keung Keith v Dalny Estates Ltd HCMP 182 of 2016, 6 April 2017 at [12] to [16] and the cases cited therein. 

11.  Mr Coleman also relied on article 75 of the Articles of Association of the company, in particular the last sentence, which reads,

“ No business shall be transacted at any adjourned meeting other than the business which might have been transacted at the meeting from which the adjournment took place.”

12.  With respect, we did not find that provision to add anything to the arguments.  If the meeting of 29 September 2017 had been validly adjourned, there could not be any problem with the adjourned resolutions being considered at the adjourned meeting of 20 October. If the meeting of 29 September 2017 had not been validly adjourned, the meeting of 20 October could not be an adjourned meeting and that sentence had no application.  The validity of the resolutions (if passed) at the meeting of 20 October had to be considered by reference to the application of the principle of irregularity and article 75 is not engaged.  

13.  As regards the resolutions passed at the Continued Meeting, Mr Coleman fairly acknowledged that he could not take this part of his case as higher than a seriously arguable case.  The judge held that this part of the Plaintiff’s case had no merit.  Whilst we would not go so far as the judge, on the materials before us (which are the same as those before the judge) we did not harbour a high degree of confidence on the prospect of success in this regard, at least not high enough to warrant the court to intervene in the company’s holding of a general meeting by way of ex parte injunctive relief.

14.  We are also unhappy with the time taken before the Plaintiff made the application to the judge for ex parte relief. The Plaintiff was aware of the date of the adjourned meeting as early as 29 September.  There was a very tight timeframe.  The duty to proceed with promptitude in seeking urgent ex parte relief has to be examined in context. In view of the facts of the present case, we do not accept Mr Coleman’s explanation that some time had to be taken up in terms of correspondence with the Defendants and there were not so many working days in between.  Unlike the judge (who did not rely on delay in refusing relief), we held the view (as we were entitled to in a renewed application under Order 59 Rule 14(3)) that such delay militated against the court entertaining the application on an ex parte basis.

15.  Election of directors is quintessentially a matter for the shareholders, with which the court is reluctant to interfere.  At this stage, we did not consider there is good reason for the court to pre-empt the course of events by granting ex parte relief restraining the matter from being considered at a general meeting, particularly when the validity of such meeting could be subject to challenge by the Plaintiff in the future.

16.  We therefore dismissed the application of the Plaintiff.