NELSON TELECOMMUNICATION GROUP (ASIA) LTD v. UNITED LAND NETWORK TECHNOLOGIES LTD

DCCJ 5962/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5962 OF 2005

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DECISION

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1.  The plaintiff asked for the first and second summonses to be adjourned pending the hearing of the third summons.  The third summons had been taken out by the plaintiff to challenge the defendant solicitor’s authority to act. 

2.  The challenge arose from an internal management matter of the defendant company’s affairs, namely, the Board of Directors’ meeting was not properly convened and the resolution passed was invalid, and the Board of Directors’ meeting was not properly convened because a quorum of two directors was not present; and the second director purportedly present – the second director being a Mr McIntosh – the plaintiff alleged that this director, Mr McIntosh, was improperly appointed, did not qualify to be a director.

3.  This is obviously a company internal management matter that the District Court has no jurisdiction to deal with.  The plaintiff have come to the wrong forum.  The proper forum is the Court of First Instance in the High Court.

4.  The plaintiff relied on the judgment in the case of Shanghai Land Holdings v Chau Ching Ngai, [2004] 3 HKC 573.  In that case, the Honourable Deputy High Court Judge To ruled that:

“In view of the challenge to the company’s internal matters, the other matters for trial should be adjourned, and the challenge to the company internal matter be resolved first before all other issues to be dealt with”. 

5.  That reasoning holds good today.  I agree with that reasoning.  Therefore in this case, I think we all agree, the third summons must be resolved first before the defendant’s first and second summonses seeking to set aside the judgment entered and to set aside the charging order against the defendant company’s property, are dealt with. The third summons could only be dealt with by the Court of First Instance.  This court does not have the jurisdiction to deal with the internal management issues in the defendant company.

6.  The plaintiff holds a contrary view.  They say that this court has the jurisdiction because the plaintiff is only challenging the defendant solicitor’s Notice to Act.  The Notice to Act in itself is a valid document, the defendant’s solicitor filed it, but it is the authority behind the Notice to Act that was challenged.  That authority to act would essentially be a matter that looked into the company’s internal management. 

7.  It looks into the running of the company, the requirement in convening a Directors’ Board meeting and any resolution passed as a result of the Board’s meeting, whether that is valid.  All of these are company internal matters that the Court of First Instance deals with and not here.  So, I do not agree with the plaintiff saying that this court could deal with it and this is the proper court.

8.  I therefore rule that the plaintiff’s third summons cannot proceed in this court.

9.  The defendant is concerned that the plaintiff would stay put, would do nothing after the court hearing today.  Any delay would definitely, in light of the background of this case, work to the detriment of the defendant.  Therefore the defendant asked this court to consider putting a time limit on the further conduct of this case, in that the third summons should proceed without any delay to the Court of First Instance and be determined there.  After the determination, the defendant could come back to the District Court to deal with the summons to set aside the default judgment.  That is a fair request.  It is a justifiable concern.

10.  To make sure that this case proceeds smoothly and to ensure that the court’s process is not used as a delaying tactic, I agree that a time limit should be set.  I would order that the plaintiff should have the third summons proceeded in the Court of First Instance within two months of the date today.  Two months is ample time to work on it.  Failing that, the defendant be at liberty to apply to strike out the third summons for want of prosecution or for being an abuse of the process of court.

11.  As for costs, I will make an order that costs of and incidental to today’s hearing be reserved, so the parties would be having a free hand at the end of the determination to ask for costs.