LUCK CONTINENT LTD v. CHENG CHEE TOCK THEODORE AND OTHERS

HCMP 702/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 702 OF 2010

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J U D G M E N T

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Introduction

1. C Y Foundation Group Limited (“CYF”) was incorporated in Bermuda in May 1994.  Since 17 October 1994, its shares have been listed on the Hong Kong Stock Exchange (“the Exchange”).  Trading in its shares has, however, been suspended since 31 August 2010.

2. On 14 April 2010, Luck Continent Limited (“Luck Continent”), CYF’s largest shareholder, commenced these proceedings under 168A of the Companies Ordinance (Cap 32).  Although Luck Continent initially claimed a number of different forms of relief in respect of CYF, by the start of the trial, only one form of relief was still pursued – an order that Bye-law 86(4) of CYF’s Articles of Association be amended so as to enable directors to be removed by an ordinary resolution (i.e. a simple majority vote) of its shareholders in general meeting, rather than a special resolution (requiring a three-quarters majority) as is presently called for.

3. Unusually for proceedings under section 168A, these proceedings are brought in respect of a publicly listed company.  Also somewhat unusually, they are brought by the company’s major shareholder.

4. The protagonists in these proceedings are CYF’s two largest sets of shareholders.  Luck Continent, the Petitioner, is a BVI company controlled by Dato Poh Po Lian (“Dato Poh”), who is its sole director and shareholder.  It holds about 46.58% of CYF’s issued shares.  The 1^st to 8^th Respondents are respectively Mr Cheng Chee Tock Theodore (“Mr Cheng), his wife Madam Leonora Yung (“Madam Yung”) and six companies controlled by Madam Yung.  Although neither Mr Cheng nor Madam Yung own any shares in CYF personally, the 3^rd to 8^th Respondents between them hold some 25.211% of CYF’s issued shares.  CYF itself is the 9^th Respondent.

The factual background

Takeover of CYF by Luck Continent

5. Between late 2006 and early 2007, Luck Continent took over CYF as a listed shell.  By late January 2007, Luck Continent held some 97.1% of the shares of CYF.  On 15 February 2007, Dato Poh and Mr Cheng were appointed as executive directors of CYF, with Mr Cheng being appointed its Chairman.  Mr Cheng remained an executive director and Chairman of CYF until 8 April 2011, when he was suspended from his executive duties in relation to CYF, although he remained a director.  Dato Poh, however, ceased to be an executive director of CYF on 27 April 2009, when he became a non-executive director.  He resigned as a director of CYF on 22 July 2009.

6. Following Luck Continent’s acquisition of control over CYF, it was required to make a general offer for its shares. Thereafter, in order to maintain the public float in CYF’s shares required for CYF to maintain its listing, Luck Continent embarked upon placement exercises (which were followed by a top up subscription for new shares in CYF).

The 1^st to 8^th Respondents’ interests in CYF

7. Mr Cheng did not initially acquire shares in CYF.  However, through the 3^rd Respondent, which he owned between December 2006 and 30 April 2008, he had an interest in convertible notes which entitled the 3^rd Respondent to subscribe for up to 1.5 billion shares in CYF.  On 30 April 2008, Mr Cheng transferred his interest in the 3^rd Respondent to Madam Yung, who has since then been the sole shareholder of the 3^rd Respondent.  On 15 April 2009, the 3^rd Respondent exercised its rights to convert the convertible notes it held into 1.5 billion shares in CYF, its current shareholding, representing some 21.524% of CYF’s issued share capital.

8. The 4^th to 8^th Respondents acquired their interests in CYF (totalling 3.687% of its issued share capital) as part of the consideration for CYF’s acquisition of a group of companies known as the Kingbox Group.  The Kingbox Group was owned by Madam Yung and a Mr John Wu.  According to Madam Yung, Mr Wu has always had a 50% interest in the 4^th Respondent, the other 50% being owned by Madam Yung, who is also the sole beneficial owner of the 5^th to 8^th Respondent companies.  Although Mr Wu has a 50% interest in the 4^th Respondent, it seems that Madam Yung is the sole shareholder and director of that company.

Dato Poh’s withdrawal from management of CYF, and attempts to regain control

9. Following Dato Poh and Mr Cheng’s acquisition of control over CYF, the company’s main business focus appears to have been the development of a computer gaming business on the Mainland.  From about 2009 onwards, however, differences appear to have arisen between Dato Poh and Mr Cheng.  Although at the time of Dato Poh’s resignation as an executive director, and later a director, of CYF, the impression given by announcements made by the company to its shareholders was that he was doing so to concentrate on his other business interests, Dato Poh has asserted in his evidence in these proceedings that he was not happy with the way in which Mr Cheng was running the company, and with the direction in which Mr Cheng was taking CYF.

10. A few months after Mr Poh’s resignation as a director of CYF, Luck Continent began to take steps with a view to taking control of the board of CYF.

11. On 3 November 2009, Luck Continent attempted to requisition the convening of a special general meeting (“SGM”) for the purpose of passing ordinary resolutions for the removal of all the existing directors of CYF and to appoint, in their place, persons nominated by Luck Continent.  On 6 November 2009, however, CYF’s then solicitors responded that as Luck Continent was registered as the owner of 9.44% of CYF’s issued shares (the rest of its shareholding being held not in its own name, but by the Stock Exchange’s clearing house, CCASS), the company was not obliged to convene an SGM (since a 10% shareholding was required to requisition a special general meeting).  In their letter, CYF’s then solicitors also stated that, in any event, a special resolution (requiring a 75% majority of shareholders present and voting), rather than an ordinary resolution (by which a simple majority would suffice), was required for the removal of directors.

12. This prompted a response from Luck Continent’s solicitors, pointing out that CYF’s bye-laws registered with the Companies Registry did not require the passing of a special resolution for this purpose. To this, CYF’s then solicitors replied by sending Luck Continent’s solicitors a copy of CYF’s bye-laws registered with the Bermudan companies registry. Article 86(4) of these bye-laws, which dealt with the removal of directors, was in the following terms:-

“86(4) Subject to any provision to the contrary in these Bye-laws the Members may, at any general meeting convened and held in accordance with these Bye-laws, by special resolution remove a Director at any time before the expiration of his period of office notwithstanding anything in these Bye-laws or in any agreement between the Company and such Director (but without prejudice to any claim for damages under any such agreement) provided that the notice of any such meeting convened for the purpose of removing a Director shall contain a statement of the intention so to do and be served on such Director fourteen (14) days before the meeting and at such meeting such Director shall be entitled to be heard on the motion for his removal.”

13. Luck Continent then attempted to obtain control of the board of CYF by different means.  On 26 November 2009, it requisitioned the convening of an SGM at which it would be proposed that the maximum number of directors of CYF should be increased from 12 to 25, and that 13 additional directors should be appointed, nominating 13 individuals for this purpose.  To this, CYF’s solicitors responded that under the Bye-laws and Bermudan law, shareholders were not entitled to nominate and appoint directors at an SGM (but could only do so at an annual general meeting (“AGM”) of the company), and that the proposed resolution for the appointment of directors was thus invalid.  CYF agreed, however, to convene an SGM for the limited purpose of increasing the maximum number of directors to 25.  The SGM was initially held on 25 January 2010, when it was adjourned to 26 February 2010.  At the adjourned SGM, the resolution to increase the maximum number of directors to 25 was passed.

Complaints to the Exchange

14. Faced with CYF’s management’s refusal to accede to its requests, on 18 December 2009 Luck Continent’s solicitors wrote to CYF’s solicitors stating that Bye-law 86(4) appeared to contravene the requirements of paragraph 4(3) of Appendix 3 of the Listing Rules of the Exchange, with which CYF had agreed to comply as a condition of its listing, and demanding that steps be taken to rectify the breach.  On the same date, complaints were also made both to the Exchange and to the Securities & Futures Commission (“SFC”) as to the apparent breach.  The Exchange stated, in letters dated 24 December 2009 and 8 January 2010, that it would look into the situation, but would not disclose what, if any, steps it might take as a result, for reasons of confidentiality.  The SFC indicated in a letter dated 26 January 2010 that the complaint was one which should more appropriately be dealt with by the Exchange.  It has, however, emerged from documents disclosed during the course of these proceedings that from about the end of 2009 onwards, the Exchange has taken the view that there has been a breach of the listing rules as a result of Bye-law 86(4) being in the terms that it is, and that the Exchange has pressed CYF to take steps to amend the bye-law so that an ordinary resolution will suffice to remove directors.

Attempts to amend Bye-law 86(4)

15. On 30 December 2009, Luck Continent requisitioned a further SGM for the purpose of passing a special resolution to amend Bye-law 86(4) by replacing the word “special” with “ordinary”.  On 20 January 2010, CYF announced that it would convene an SGM to be held on 26 February 2010, for the purpose of considering and (if thought fit) passing a special resolution to amend the bye-law as proposed by Luck Continent.  In a circular to shareholders issued the same day, CYF stated that its directors considered the resolution to be in the interests of the shareholders as a whole, and recommended that shareholders should vote in favour of it.

16. As Madam Yung controlled just over 25% of the issued shares of CYF, it was apparent that she could block the passing of the special resolution if she were minded to do so.  Luck Continent’s solicitors therefore wrote to her solicitors on 4 February 2010, demanding that she should not vote against the resolution, having regard to what they suggested would be serious consequences for CYF if the resolution were not passed – it being suggested that a failure to pass the resolution so as to bring the bye-law into line with the requirements of the Listing Rules might jeopardise CYF’s listed status, the loss of which would be highly detrimental to CYF, and to its shareholders generally.  On 9 February 2010, however, Madam Yung’s solicitors indicated that she was entitled to exercise her votes as she wished, and in accordance with what she regarded as her own interests.

17. In the event, at the SGM on 26 February 2010, the resolution for the amendment of Bye-law 86(4) was defeated.  Some 5,029,439,983 shares representing around 72% of the issued shares in CYF were voted on the resolution, of which 3,251,161,127 (or 64.643% of the shares voted) supported the resolution, while 1,778,278, 856 (or 35.357% of the shares voted) were against the resolution.  As Madam Yung controlled exactly the number of shares voted against the resolution, Luck Continent’s solicitors complained to her solicitors that she must have voted against the resolution. Although initially denying that this was the case, Madam Yung’s solicitors later confirmed that she had voted against the resolution, but insisted that she was entitled to do so.  At the trial, Madam Yung confirmed that she had voted against the resolutions, as appeared from proxy forms submitted by the 3^rd to 8^th Respondents, which had been signed by her on their respective behalves.

Issue of the petition, main complaints made and relief claimed

18. On 14 April 2010, Luck Continent presented the petition in these proceedings.  Apart from complaining about the alleged breach of the Listing Rules and the failure to amend Bye-law 86(4) so as to rectify the breach, which was said to be unfairly prejudicial to CYF’s shareholders or some part of them, Luck Continent also raised complaints as to a large range of transactions that CYF had engaged in under the management of Mr Cheng and its then board of directors.  These transactions included:-

(1)  The acquisition by CYF of its office premises on the 17^th floor of Sun’s Group Centre (“the 17^th Floor Transaction”), in respect of which it was alleged that Mr Cheng and Madam Yung had concealed their ownership of the property acquired by CYF, and made secret profits out of the transaction.

(2)  The making of an apparent loan of HK$27 million to a company called Time Poly, by which Mr Cheng caused CYF to transfer HK$27 million to Sino Strategic International Limited (“SSI”) an Australian listed company said to be controlled by Mr Cheng.

(3)  Various transactions described as the “Suzhou Caidebao Transactions”, in respect of which it was said that Mr Cheng had concealed his and/or Madam Yung’s interests, used CYF’s funds to finance the project at a time when the project belonged to Madam Yung personally, and had failed to extricate CYF from the transaction and recover its investments in it despite the project having failed to progress for a considerable period of time.

(4)  The failure of Madam Yung to permit CYF or its representatives to inspect the accounts of the Kingbox Group, which it had acquired from her, a failure which was said to involve a conflict of interest on her part since she had given a profit guarantee to CYF in respect of the Kingbox Group’s profits as part of the transaction by which CYF acquired the Kingbox Group from her.

(5)  A transaction involving the Wuxi Yucai Middle School, in respect of which Mr Cheng was said to have failed to make proper disclosure or seek shareholder approval.

(6)  The subscription by CYF for certain convertible notes issued by Best Max Holdings Limited which was alleged to have been a means to enable Mr Cheng to cause CYF to make an investment in another company called Wuxi Jujin Information Net Technology Company Limited, which CYF had earlier invested in and pulled out of as a result of due diligence concerns.

(7)  It was also alleged that there were problems with the accounts of CYF, and that there had been a rapid depletion of the cash reserves of CYF and its group of companies.

19. However, for reasons which I explain below, with the exception of the 17^th Floor Transaction, none of these complaints were gone into at the trial.

20. The relief claimed in the petition was as follows:-

(1)  an order amending Bye-law 86(4) by substituting the word “special” with “ordinary”, so as to make it possible for a director to be removed by an ordinary resolution;

(2)  an amendment to Bye-law 86(1) to permit members to fill vacancies on the board at any general meeting of CYF (and not only at an AGM);

(3)  an injunction restraining Madam Yung and the 3^rd to 8^th Respondents from voting against a resolution to amend Bye‑law 86(4) that was to be proposed (again) at an SGM to be held on 30 April 2010, or at any adjournment of that meeting, or at any future meeting at which a similar resolution might be proposed;

(4)  an order requiring CYF to cause one of its subsidiaries not to proceed with the Suzhou Caidebao transaction;

(5)  a declaration that the appointment of three further directors as executive directors (with effect from 16 November 2009) was invalid and ineffective;

(6)  the appointment of receivers and/or managers in respect of CYF, or of some other person, for the purpose of conducting an independent investigation into the various matters complained of in the petition.

21. In the event, at the trial, Luck Continent only pursued the first item of relief mentioned – namely, an order amending Bye-law 86(4) in the manner sought.

Developments after issue of the petition

22. A further SGM of CYF was held on 30 April 2010 for the purpose of voting again on the proposed amendment to Bye-law 86(4). However, the resolution was again defeated, the vote being broadly similar in result to that which took place at the earlier SGM on 26 February 2010.

23. On the resolution being defeated for a second time, Luck Continent issued a summons (“the IIA Summons”) seeking the appointment of Deloitte Touche Tohmatsu (“Deloittes”) or BDO Financial Services Limited (“BDO”) as independent investigative accountants in respect of CYF for the purpose of investigating and reporting on the transactions complained of in the petition.  That application was adjourned when CYF undertook, on 12 May 2009, to appoint BDO as such independent investigative accountants.  However, two days later, CYF announced that it had revoked BDO’s appointment due to an alleged conflict of interest, and proposed instead to appoint Ernst & Young Transactions Limited in its place.  As a result, Luck Continent sought and obtained leave to restore the IIA Summons for hearing.  However, as it became possible for the trial of the petition to be heard earlier than expected, the IIA Summons was adjourned to be heard at the trial.

24. On 2 July 2010, a third SGM was held to consider amending Bye-law 86(4) as Luck Continent proposed.  However, the resolution was once again defeated, with the voting being much the same as that at the previous two SGMs.

25. On 30 August 2010, CYF’s offices were raided by the Independent Commission Against Corruption (“ICAC”).  Mr Cheng and Madam Yung were arrested, and while Madam Yung was subsequently released without charge, Mr Cheng was eventually charged (jointly with two others) with an offence of fraud in relation to the 17^th Floor Transaction.

26. The following day, 31 August 2010, trading in CYF’s shares was suspended.

Delay in holding of CYF’s 2010 AGM and further developments thereafter

27. On 13 September 2010, CYF announced that its 2010 AGM, which should have been held on or before 31 October 2010, would be postponed indefinitely.  The reason given for the postponement was that there was a possibility that the audited accounts for the financial year ended 31 March 2010 might be subject to review by an independent firm of accountants.

28. The postponement of CYF’s AGM was a matter of concern for Luck Continent, as nine out of CYF’s 12 directors were due to retire at the AGM, and (although the retiring directors could seek re-election), Luck Continent would have been in a position to propose candidates for appointment to the board of directors at the AGM in competition with them.  Given that Luck Continent held over 46% of CYF’s shares, it would have been very likely that it would be able to secure the election of its preferred candidates as directors and thus gain control of CYF’s board.  The postponement of the AGM meant that it would not be able to achieve this in the foreseeable future.  Thus, in the light of the arrests made by the ICAC, and the postponement of the AGM, Luck Continent issued a further summons on 15 September 2010, seeking the appointment of receivers over CYF (“the Receivership Summons”).  Like the IIA Summons, the Receivership Summons was eventually adjourned to be heard at the trial of the petition.

29. Apart from issuing the Receivership Summons, on 27 October 2010, Luck Continent commenced separate proceedings (HCA 1601/2010) against CYF, seeking an order that CYF convene its 2010 AGM forthwith, and issued an application for summary judgment in that action on 10 November 2010.  In response, one of CYF’s non-executive directors took out proceedings in Bermuda on 3 December 2010 seeking an order postponing the 2010 AGM until after the board had obtained and considered advice from KPMG as to whether or not CYF’s accounts for the year ended 31 March 2010 should be restated.  Luck Continent in turn issued a summons in the Bermuda proceedings seeking an order compelling the convening of the 2010 AGM forthwith.  As this was substantially the same relief as it was seeking sought in HCA 1601/2010, Luck Continent agreed to stay those proceedings pending the outcome of the proceedings in Bermuda. The proceedings in Bermuda were heard on 22 February 2011, and on 1 March 2011, the Bermudan court gave judgment dismissing the application for a postponement of the 2010 AGM, and making an order in substantially the terms sought by Luck Continent’s summons.  The Bermudan court ordered that CYF should give notice forthwith convening the 2010 AGM to be held on a date not later than 35 days from its order (i.e. by 5 April 2011).

Limitation of relief sought by Luck Continent

30. In the light of these developments, Luck Continent reassessed the need for the relief it was seeking in these proceedings.  At a pre-trial review on 10 March 2011, Mr Sussex, who appeared for Luck Continent at the trial, indicated that for the purposes of the trial, the only relief that would be pursued would be an order amending Bye-law 86(4) in the manner proposed by Luck Continent.  He explained that because Luck Continent expected to gain control of CYF’s board at the AGM which the Bermuda court had ordered to be held in the near future, it was not thought necessary to pursue either the IIA Summons or the Receivership Summons, nor to seek the appointment of independent investigative accountants or receivers as substantive relief in the proceedings, as it would be possible for the new board of CYF to investigate the transactions and dealings complained of in the petition, and (if thought appropriate) take action against the relevant persons in respect of such transactions and dealings.  He also suggested that it would not be necessary to investigate those transactions and dealings at the trial, as their main relevance, as he saw it, was in support of the IIA and Receivership applications, which were taken out in order to obtain interim protection against mismanagement by the board of CYF pending the trial of the proceedings.  Subsequently, however, Mr Sussex indicated that Luck Continent would, while pursuing only the relief in relation to the amendment of Bye-law 86(4), also pursue the complaints in relation to the 17^th Floor Transaction, for the purpose of what he described as a fall-back argument for that relief.  So far as the other allegations were concerned, Mr Sussex said that while it was not intended to deal with them at the trial, Luck Continent would, if necessary, rely on them for the purposes of arguments as to costs of the proceedings at the end of the day.

31. Ms Chan, representing Mr Cheng, Madam Yung and the 3^rd to 8^th Respondents, contended that Luck Continent should not be allowed to leave on one side for the time being the various other allegations of impropriety that had been levelled against Mr Cheng and Madam Yung, and should be required either to prove those allegations at the trial, or to abandon them once and for all.  Ms Po, who appeared for CYF, with a view to making submissions on the relief relating to the appointment of receivers or independent investigative accountants took a similar stance.

32. I concluded that for the purposes of the trial, Mr Sussex was entitled to advance his client’s case as he thought appropriate, and that he should not be required to pursue at the trial those parts of the case which he did not consider necessary for the purposes of obtaining the relief sought, and that what use, if any, he could make of the other allegations in the context of any argument as to costs should be dealt with when costs were considered.  Luck Continent was, however, required to provide a statement of the case it intended to pursue at the trial in order to clarify the precise ambit of the case it was continuing to maintain.  Although initially it appeared that substantially all of the allegations of wrongdoing levelled against Mr Cheng and Madam Yung were to be retained as part of Luck Continent’s case, although it was suggested that it was only necessary, and would suffice, for Luck Continent to establish that they had “a case to answer” in relation to those allegations, and not to prove the allegations on a balance of probabilities.  Subsequently, however, by its Statement of Case dated 18 March 2011, served pursuant to a further direction made on 17 March 2011, Luck Continent indicated that it would pursue the following main lines of argument.

33. The first was to the effect that the failure or refusal of CYF to amend Bye-law 86(4) constituted unfairly prejudicial conduct which entitled the court to order that the bye-law be amended pursuant to the court’s powers under section 168A, as submitted in its written opening submissions of 5 March 2011.  This argument was, in essence, that CYF having agreed with the Exchange (through its listing agreement and undertakings given pursuant to it) to observe the Listing Rules in effect from time to time, was under an obligation to ensure that Bye-law 86(4) conformed with the requirements imposed by the Listing Rules as to the form that articles of association of listed companies were required to take.  As Article 86(4) in its present form did not so conform, CYF was in breach of its obligations under the Listing Rules and its listing agreements, and was therefore at risk of having the listing of its shares suspended or cancelled.  This was unfair, since CYF had agreed to observe the Listing Rules, and its shareholders were therefore entitled to expect it to do so (notwithstanding that the listing agreement was not an agreement to which the shareholders were parties), and not to be in breach so as to put its continued listing at risk.  Further, the risk of a suspension or loss of CYF’s listing, which it was said had crystallised after the commencement of the proceedings, when the company sought a suspension of trading, which (Luck Continent contends) is unlikely to be lifted so long as CYF is in continued breach of its Listing Rules obligations in relation to Bye-law 86(4), was a matter that was prejudicial to CYF’s shareholders, or some part of them (including Luck Continent).

34. So far as Madam Yung was concerned, it was contended that her acts in voting the shares that she controlled against the amendments to Bye-law 86(4) proposed by CYF at the SGMs held on 26 February, 30 April and 2 July, so as to defeat the resolutions for amendment, had brought about a situation in which CYF had acted in the unfairly prejudicial manner explained in the previous paragraph.

35. For the purposes of this argument, Mr Sussex submitted that Madam Yung’s motivations for voting the shares she controlled as she did were irrelevant, since what was complained of was CYF’s action (or more accurately, inaction) brought about as a result.  Whatever Madam Yung’s reasons for voting as she did might have been, the relevant matter for the purposes of this argument was that the outcome was that CYF had not amended Bye-law 86(4), thereby remaining in breach of the Listing Rules, a matter which was in itself both unfair and prejudicial to CYF’s shareholders. Even if, for the sake of argument, Madam Yung had impeccable reasons for voting as she had done, the result would still be that Bye-law 86(4) would be in a form which left CYF in breach of its Listing Rules obligations, and at risk of a suspension or cancellation of its listing.

36. However, if this was wrong, and Madam Yung’s motives were relevant, Mr Sussex submitted that she had voted the shares under her control in bad faith, and otherwise than in the best interests of CYF, as her reason for voting as she did was to keep her husband, Mr Cheng, and his appointees in control of the board, by preventing Luck Continent from removing them as directors.  She did so, Mr Sussex suggested, in order to prevent the alleged wrongful acts on his part from being investigated and pursued by CYF (although for present purposes, the only alleged wrongful acts relied upon at the trial were those in relation to the 17^th Floor Transaction).

37. Mr Sussex also put the alleged unfair prejudice in a different way.  He submitted that the failure to amend Bye-law 86(4) made it impossible for a majority of CYF’s shareholders to remove Mr Cheng as a director in circumstances in which he had (at least) a case to answer in respect of his misconduct in connection with the 17^th Floor Transaction.  This, he said was also unfair and prejudicial, as the alleged misconduct had resulted in the ICAC investigation, charges of fraud being laid against Mr Cheng, and the suspension of trading in CYF’s shares, and it was to be inferred that the suspension would not be lifted so long as Mr Cheng remained a director and the prosecution was not concluded.  He also suggested that it was unfair for CYF to be left in a position in which it could not remove a director against whom there was a prima facie case of serious, even criminal, misconduct.

Impact on the trial

38. As a result of this approach being taken by Mr Sussex, the evidence at the trial was substantially limited in its scope.  So far as Mr Sussex’s primary case was concerned, much of the factual basis for it was not disputed, and where there were factual disputes (for example, in relation to whether or not there was real prejudice to the shareholders as a result of the failure of CYF to amend Bye-law 86(4)), these were largely matters to be resolved on the basis of documentary evidence, as there were no witnesses to speak to them.  The main areas to which the oral evidence at the trial was directed were in relation to: (1) matters of general background and the relationship between Dato Poh, Mr Cheng, and other persons involved in the takeover of CYF (in particular a Mr Kenny Nam); (2) matters which had a bearing on the 17^th Floor Transaction; (3) an alleged conflict of interest on the part of Dato Poh in respect of claims which Mr Cheng and Madam Yung said CYF had against Weike (S) Pte Limited, a Singaporean company controlled by Dato Poh which had entered into a contract with CYF to supply CYF with computer gaming consoles and operating software for the purposes of CYF’s business in China; and (4) Madam Yung’s reasons for voting the shares controlled by her as she did at the various SGMs at which the amendment of Bye-law 86(4) was proposed.

39. The principal witnesses giving evidence at the trial were Dato Poh and Mr Sneah Kar Loon (who had for a time been the CEO of CYF) for Luck Continent, and Mr Cheng and Madam Yung for themselves and the 3^rd to 8^th Respondents.  A number of other witnesses also gave evidence, mainly in relation to the allegations concerning the Weike machines levelled by Mr Cheng and Madam Yung against Dato Poh.  As will become apparent from what follows in this judgment, I have concluded that most of the oral evidence is not in fact necessary for the determination of these proceedings, and I have not dealt with it at any length, or in any significant detail.

40. Also as a result of Luck Continent’s case being limited to seeking an order for the amendment of Bye-law 86(4), CYF no longer took an active part in the trial – it had previously intended to participate in relation to issues relating to the relief relating to the appointment of receivers or independent investigative accountants.  However, Ms Po continued to appear on the instructions of CYF, with a view to tendering for cross-examination its witnesses who had evidence to give in relation to the matters that were still to be looked into, until her instructions to act for the company were terminated on 8 April 2011, following the change in control of CYF’s board mentioned in the next paragraph.

Change in composition of CYF’s board, and acquisition of control by Luck Continent

41. While the trial was continuing, there were further developments in relation to CYF’s overdue AGM.  Following unsuccessful attempts on the part of CYF’s director who had brought the Bermuda proceedings to obtain a stay of the order requiring the convening of the AGM pending an appeal, the AGM was eventually held on 6 April 2011.  However, shortly before the AGM was held, a third party (the Administratrix of the estate of Mr Kenny Nam, who had been involved in the acquisition of control of CYF by Luck Continent, claimed that Luck Continent was in fact beneficially owned by Mr Nam prior to his death in late 2008, and therefore was now beneficially owned by his estate (and not Mr Poh).  At the AGM, Luck Continent’s votes in favour of the candidates for directorship of CYF proposed by it were excluded from consideration by the chairman of the meeting, resulting in the incumbent directors being apparently returned to office.  Luck Continent promptly applied to the Bermuda court to have the results of the AGM as declared by the chairman of the meeting avoided, and to have the votes tallied on the basis that its votes should be taken into account.  This application was successful, with the result that as from 8 April 2011, Luck Continent obtained control of the board of CYF, in that its proposed directors were elected in place of the incumbents who were up for re-election.  Mr Cheng, however, remained in office, as he was not required to retire by rotation at the 2010 AGM.  However, he was immediately suspended from his executive duties by the newly elected board, pending in investigation by an independent committee into the various complaints which had been made against him by Luck Continent.

42. Notwithstanding that Luck Continent had obtained control of the board, Mr Sussex made it clear that it continued to seek an order for the amendment of Bye-law 86(4), since that was required in order (he submitted) to put CYF’s articles in a state of compliance with the requirements of the Listing Rules, and there could be no certainty that any future SGM that might be called for the purpose of considering the proposed amendments would meet with any different result from the three that had already been held.

Luck Continent’s primary case

43. Mr Sussex’s primary contention, or what he called his “short case” in relation to the amendment of Bye-law 86(4) was as follows.

44. The starting point of the submission was section 168A of the Companies Ordinance, which provides, so far as relevant for present purposes, that:-

“(1) Any member of a specified corporation [which includes foreign companies, such as CYF, that have a place of business in Hong Kong] who complains that the affairs of the specified corporation are being or have been conducted in a manner unfairly prejudicial to the interests of the members generally or of some part of the members (including himself) … may make an application to the court by petition for an order under this section.

(2) If on any petition under subsection (1) the court is of opinion that the specified corporation’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of the members generally or of some part of the members (including the member who presented the petition), whether or not such conduct consists of an isolated act or a series of acts –

(a) the court may, with a view to bringing to an end the matters complained of –

…

(iv) make such order as it thinks fit, whether for regulating the conduct of the specified corporation’s affairs in future …

(3)  Where an order under this section makes any alteration in or addition to the memorandum or articles of a specified corporation, then, notwithstanding anything in any other provision of this Ordinance but subject to the provisions of the order, the specified corporation shall not have power without the leave of the court to make any further alteration in or addition to the memorandum or articles inconsistent with the provisions of the order; but, subject to the provisions of this subsection, the alterations or additions made by the order shall be of the same effect as if duly made by resolution of the specified corporation and the provisions of this Ordinance shall apply to the memorandum or articles as so altered or added to accordingly.”

45. Mr Sussex submitted that it was clear from these provisions that:-

(1)  The state of a company’s constitution was part of the “affairs” of the company in question.

(2)  Amendments to that constitution were an act of the company, so that it followed that a failure to make such amendments was equally an act or omission of the company.

(3)  The court had power, under section 168A(2)(a)(iv), to order that the articles of a company which was the subject of a section 168A petition should be amended where it was appropriate to do so.

46. The next stage of the submission was that by keeping Bye‑law 86(4) in its present form (as the result of the failure to pass the amending resolutions proposed at the SGMs of 26 February, 30 April or 2 July 2010), CYF was in breach of the Listing Rules, because:-

(1)  Rule 13.01 of the Listing Rules imposes a continuing obligation on listed companies to comply with the Listing Rules “from time to time in force”.

(2)  The obligation under rule 13.01 is reinforced, or reiterated, by the terms of the undertaking given by the company to the Exchange (the terms of which are set out in Appendix 5 of the Listing Rules) that:-

“… for so long as any of our securities are listed on the Main Board, to comply at all times with all of the requirements of the Exchange Listing Rules from time to time in force.”

(3)  Appendix 3 of the Listing Rules provides, so far as relevant:-

“The articles of association or equivalent document must conform with the following provisions and, where necessary, a certified copy of a resolution of the board of directors or other governing body undertaking to comply with the appropriate provisions must be lodged with the Exchange. This appendix does not apply to an issuer which has only debt securities listed [which is not the case in relation to CYF].

…

4. …

  (3)  That, where not otherwise provided by law, the issuer in general meeting shall have power by ordinary resolution to remove any director (including a managing or other executive director, but without prejudice to any claim for damages under any contract) before the expiration of his period of office.”

47. As Bye-law 86(4) required the removal of a director prior to the expiration of his period of office to be effected by a special resolution, rather than an ordinary resolution (thus requiring a three-quarters majority vote rather than a simple majority vote), it was not in accordance with paragraph 4(3) of Appendix 3, so that CYF’s articles were not in compliance with the requirements of Appendix 3 and CYF was accordingly in breach of the Listing Rules.

48. The next stage of the submission was the contention that the failure of CYF to remedy this breach was unfair.  Mr Sussex’s argument was that as CYF had agreed with the Exchange to comply with the Listing Rules as a condition of its listing, it was unfair for it to fail to do so, particularly if the consequence of such failure was that its listing might be jeopardised by being liable to suspension or cancellation.  Although recognising that CYF’s shareholders were not parties to the listing agreement, and were not persons to whom CYF’s undertaking to the Exchange was addressed, Mr Sussex contended that it was possible to regard the position as being one in which CYF had effectively promised its shareholders that it would comply with the Listing Rules at least to the extent necessary to ensure that its listed status was not imperilled.  This was clearly an important promise, because the maintenance of the company’s listed status was something that its shareholders relied upon in acquiring its shares – the listed status, and the ability to dispose of shares through the Exchange was valuable, not just to CYF, but to its shareholders, since this enabled them to readily dispose of their investment in the company in a reasonably liquid market.

49. As a matter of juridical analysis, Mr Sussex suggested that this “promise” could be viewed as either:-

(1)  a collateral agreement between CYF and its shareholders to the effect that it would not fail to comply with the Listing Rules in such a manner as to jeopardise its listing; or

(2)  a case of the listing agreement and undertaking, although made with and given to the Exchange, being for the benefit not just of the Exchange and CYF, but of anyone who might become a shareholder of CYF (including Luck Continent), so that it would be unfair to its shareholders to permit CYF to ignore its obligations under the Listing Rules with the possible consequence of the loss of its listing – in effect that the promise, although not enforceable at law by the shareholders because it was given to a third party (the Exchange), was one from which Equity would not permit the company to resile; or

(3)  the promise in the listing agreement and undertaking being an implied promise to CYF’s shareholders, who relied upon it by acquiring and holding shares in CYF, so that CYF was estopped from breaking that promise.

50. So far as prejudice was concerned, Mr Sussex submitted that as rule 13.03 of the Listing Rules provided that non-compliance with the Listing Rules could result in suspension from trading, or cancellation of the listing, there was clear prejudice to shareholders where there was a breach of the Listing Rules.  In this case, the prejudice was manifest, since it appeared from correspondence between the Exchange and CYF that CYF’s shares having been suspended from trading, a resumption of trading would not be likely to be approved so long as there were any unresolved regulatory issues – one of which, Mr Sussex said, was the failure of Bye-law 86(4) to conform with the requirements of paragraph 4(3) of Appendix 3.  That this was an issue of concern to the Exchange was also, it was submitted, apparent from the correspondence, which showed that the Exchange was pressing CYF to take steps to amend the bye-law appropriately.

51. In these circumstances, Mr Sussex submitted that the court should order the amendment prayed for, as CYF would otherwise remain in breach of the Listing Rules, its shares would not be able to resume trading, and the prejudice to CYF’s shareholders would continue.

Luck Continent’s alternative argument

52. As an alternative argument, as I have noted, Mr Sussex submitted that there was at least a prima facie case that Mr Cheng had been guilty of misconduct in respect of the 17^th Floor Transaction (it being contended that he and Madam Cheng had obtained personal benefits from the transaction arising from their alleged beneficial ownership of the vendor of the property to CYF), it was unsatisfactory and unfairly prejudicial that Luck Continent should not be able to remove him from office.

The Respondents’ arguments

53. For Mr Cheng and Madam Yung, Ms Chan argued that the relief sought should not be granted.  In support of this position, and in opposition to Luck Continent’s primary case, she contended that:-

(1)  CYF was not in breach of the Listing Rules, in that properly construed, the Listing Rules did not require a company whose shares were already listed to amend its constitution so as to bring it into compliance with Appendix 3 of the Listing Rules.  In the case of CYF, its listing dated back to 1994, whereas Appendix 3 in its present form was only introduced in February 2006, as part of what were described as minor and housekeeping amendments.  It was suggested that there was no specific obligation in any of the Listing Rules that required a company which had already been listed to ensure that its Memorandum and Articles of Association were in line with the revised Appendix 3.  It was further submitted that, as the only reference to Appendix 3 in the body of the Listing Rules was in the context of Rule 13.51 (which deals with amendments made by a company to its constitution), it followed that where no amendments were made, there could be no breach of the Listing Rules.

(2)  Further, CYF, having convened the SGMs at which the proposed amendments were put to its shareholders for consideration, and having (by its board) recommended that the shareholders should vote in favour of the resolution, had done everything it could to comply with the Listing Rules.  As amendments to a company’s articles of association had to be effected by special resolution of the shareholders in general meeting, and it was not permitted to place pressure on shareholders to vote in any particular way, there could be no obligation on the company to actually amend its articles, but only to give the shareholders the opportunity to decide whether or not to do so.

(3)  The shareholders of CYF were not themselves parties to the listing agreement or undertaking given by CYF to the Exchange, and so could not be compelled to vote in any particular way when considering whether or not Article 86(4) should be amended as proposed.

(4)  Further, and in any event, the relevant Bermudan laws (section 93(1) of the Bermudan Companies Act) provided that it was permissible for a company’s bye-laws to provide for the sort of resolution necessary to remove a director, and the articles of CYF provided for this to be done by special resolution.  Thus, Bermudan law did, for the purposes of paragraph 4(3) of Appendix 3, provide otherwise than that a director should be removed by ordinary resolution.

(5)  Moreover, the exercise of the 3^rd to 8^th Respondents’ voting rights was not the conduct of the affairs of the company, but was simply the exercise of those Respondents’ private rights.  While a resolution passed at a general meeting might amount to an act of the company, or the conduct of its affairs, this was not necessarily so in every case.  In the case of amendments to its constitution, much would depend on the nature of the amendments in question.

(6)  In any event, there was no unfairness in the failure to amend Bye-law 86(4), because for the purposes of section 168A, the starting point in considering whether or not there was any unfairness was whether the parties had departed from what they had agreed to either in the constitution of the company, or in some collateral agreement.  In the present case, there was no equitable constraint requiring the 3^rd to 8^th Respondents to vote in favour of an amendment to the bye‑law, and they were therefore free to exercise their right to vote their shareholding as they saw fit.

(7)  There was no such equitable constraint because, on the authorities, such equitable constraints would generally arise by reason of matters of a personal nature arising between shareholders, and such personal matters could have no place to play in the context of a publicly listed company, since they would be unknown to the general body of shareholders, who would be dealing in the company’s shares in ignorance of them.  In other words, given the nature of a public company, it was particularly important for shareholders to be able to rely on the public documents (the company’s constitution) as a complete repository of all relevant rights, so that there was no room for equities arising on the basis of private arrangements between some shareholders, or between some shareholders and the company, to operate.

(8)  In this case, there was no unfairness because Luck Continent had been in a position (prior to the 3^rd to 8^th Respondents’ acquisition of their shareholdings in CYF) to have procured the passing of the amendments now sought, but it had failed to do so.

(9)  Further, the arguments now put forward for suggesting that it was unfair for CYF to fail to amend Bye-law 86(4) (i.e. that the promise to the shareholders described in paragraph 47 above could be regarded as arising as a matter of collateral agreement, third party agreement or estoppels) were not open to Luck Continent without amendment to the petition (which was not sought by Luck Continent).

(10)  So far as the estoppel analysis was concerned, no promissory estoppel could arise, as the parties were not in a pre-existing legal relationship, nor was it possible to identify some right under the bye-laws which the company had promised not to enforce, nor was there any detrimental reliance, as Luck Continent must have been aware of the state of CYF’s articles and their inconsistency with the requirements of the Listing Rules (if, contrary to the submission mentioned in sub‑paragraph (4) above, there was such an inconsistency) when it acquired its shareholding in CYF, and had done nothing about it when it was in a position thereafter to have dealt with it.

(11)  There was no obligation on the part of the 3^rd to 8^th Respondents to vote their shares bona fide in the interests of the company, as the obligation to do so only arose in the context of the making of amendments to the articles, and not to a situation in which proposed amendments were rejected and the status quo maintained.

(12)  Even if this was not right, having regard to the misconduct on Dato Poh’s part in relation to Weike’s relationship with CYF, and concerns as to alleged conflicts of interest on his part in relation to other transactions (including the 17^th Floor Transaction), it was justified for the 3^rd to 8^th Respondents to vote as they did.

(13)  The prejudice identified by Luck Continent was not established, as Luck Continent could not show that there was in fact a real risk that CYF’s listing would have been jeopardised as a result of the breach (if there was one) of paragraph 4(3) of Appendix 3 of the Listing Rules, given that the Exchange had taken no action in relation to it until Luck Continent’s complaint, and it was far from clear that the retention of Bye-law 86(4) in its present form would be an impediment to the resumption of trading in CYF’s shares at some future time.

(14)  Finally, and in any case, given that Luck Continent was now in control of CYF’s board, there was no need for any relief to be granted, since the purpose of seeking the amendment was to enable Luck Continent to remove the then incumbent directors from office, and this had now been done.

54. As to Luck Continent’s alternative case, Ms Chan submitted that it was not to the point to suggest that Mr Cheng was prima facie guilty of misconduct.  Either it was entitled to remove him, or it was not.  Further, on the totality of the evidence, Ms Chan submitted that it could not be concluded that Mr Cheng was in fact guilty of misconduct, whether on a prima facie basis or at all.  On the contrary, she suggested that far from it being the case that Mr Cheng was beneficially interested in the vendor in the 17^th Floor Transaction, having regard to the evidence, there was reason to think that it was in fact Dato Poh who was behind the vendor of the 17^th floor to CYF.

Issues for consideration

55. In my view, the competing submissions raise the following issues for determination:-

(1)  Whether, under the Listing Rules, CYF is obliged to bring Bye-law 86(4) into line with paragraph 4(3) of Appendix 3. This involves consideration of the following points:-

  (a)  Whether companies already listed are under an obligation to comply with the requirements of Appendix 3.

  (b)  If so, whether the provisions of section 93(1) of the Companies Act of Bermuda are sufficient to bring CYF within the proviso (“otherwise provided by law”) to paragraph 4(3) of Appendix 3.

(2)  Whether the result of the vote taken at the SGMs at which the amendment to Bye-law 86(4) was considered, and the consequent failure to effect the amendment, is to be regarded solely as an act of the shareholders of CYF, or an act (or lack of action) on the part of CYF itself.

(3)  In the light of the answer to (2) above, whether CYF has discharged its Listing Rules obligations by convening the SGMs, or whether, having regard to the outcome of the earlier questions, the fact that Bye-law 86(4) remains in its present form means that CYF is in breach of its obligations under the Listing Rules and its undertaking to the Exchange.

(4)  Whether there was any unfairness arising from the failure to amend Bye-law 86(4).  In particular:-

  (a)  Whether the 3^rd to 8^th Respondents, as shareholders, are entitled to exercise their right to vote at general meetings of CYF as they please, or whether such rights are subject to any constraint.

  (b)  Whether the 3^rd to 8^th Respondents’ reasons for voting as they did are relevant to the issue of unfairness.

  (c)  Whether or not the 3^rd to 8^th Respondents had a proper basis for voting as they did.

  (d)  Whether or not there can be unfairness such as to ground a section 168A petition arising from matters extraneous to the articles of association in the case of a publicly listed company, or whether there is no room for such considerations in such a case.

  (e)  If there is scope for unfairness to arise outside of the articles of association:-

  (i)  Is it open to Luck Continent to complain of the unfairness contended for by Mr Sussex, having regard to the allegations in its petition.

  (ii)  Whether any of the bases on which Mr Sussex puts his case on unfairness are proper ones to have regard to.

  (iii)  Whether Luck Continent is prevented from complaining of unfairness, having failed to cause CYF to implement amendments to its articles earlier, when it could have done so.

(5)  Whether the failure to amend Bye-law 86(4) was prejudicial to CYF’s shareholders generally, or some part of them.

(6)  Whether, in the light of Luck Continent having obtained control of CYF’s board, the relief sought is still necessary.

(7)  If necessary, in relation to Luck Continent’s alternative case:-

  (a)  Whether the establishment of a prima facie case of misconduct on the part of Mr Cheng in respect of the 17^th Floor Transaction means that there is prejudice to Luck Continent in being unable to remove him.

  (b)  Whether or not the evidence discloses such a prima facie case of misconduct, or a case for Mr Cheng to answer.

(1) Must Bye-law 86(4) conform with para 4(3) of App 3?

(1)(a) Do already listed companies need to conform?

56. Are companies that are already listed on the Exchange obliged to conform with the requirements of Appendix 3?  On the face of it, Appendix 3 itself imposes, in its opening words, a requirement in self‑evidently mandatory terms, that the articles of association of all listed companies must conform to its provisions.  I agree with Mr Sussex that this is a free-standing obligation, which does not require further words of incorporation elsewhere in the Listing Rules before it can apply.

57. I do not think that the Ms Chan’s submission to the effect that because Appendix 3 is only mentioned in the body of the Listing Rules in the context of the notes to Rule 13.51, the result is that the only obligation on an already listed company in respect of Appendix 3 is to ensure that any proposed amendments to its articles conforms with, and does not cause it to cease to comply with, the requirements of Appendix 3, so that those requirements only bite where an amendment is under consideration, can be correct.  This is for a number of reasons:-

(1)  The purpose of Appendix 3 is to set out certain minimum requirements that listed companies in Hong Kong are required to meet in relation to their constitutive documents.  The object of this must be to provide, so far as possible, a uniform base-line that shareholders of listed companies can expect in terms of shareholder rights on various matters of importance, one of which is the right of shareholders in general meeting to remove a director at any time.

(2)  The terms of paragraph 4(3) of Appendix 3 mirror the provisions of section 157B(1) of the Companies Ordinance in respect of this right.  Given that shareholders of Hong Kong companies are entitled to remove directors by an ordinary resolution, it is well understandable that a similar level of shareholder power should be sought to be provided in respect of overseas companies that choose to be listed in Hong Kong.

(3)  In these circumstances, there would seem to be no reason or justification to exempt already listed companies from the need to ensure that their articles of association conform with the requirements of Appendix 3.

(4)  The fact that mention is made of Appendix 3 in the context of Rule 13.51 does not compel a different conclusion.  Rule 13.51 in fact requires listed companies to notify the Exchange of any decision in relation to proposed amendments to their articles. The reminder in the notes to the rule as to the need to comply with the Appendix 3 requirements does not mean that Appendix 3 need not otherwise be complied with.  Indeed, it would be surprising if (ignoring for the moment the mandatory terms in which the introductory words of Appendix 3 are couched) a listed company should be under no obligation to amend its articles to bring them into conformity, but should then become under such an obligation should it choose to make amendments to them.

(5)  Further, the fact that the amendments to Appendix 3 which resulted in paragraph 4(3) being in the form that it now is were described as minor and housekeeping amendments is, I think, neither here nor there.  While the change to paragraph 4(3) made by the amendments may have been regarded as housekeeping, perhaps in the sense of bringing the relevant terms of Appendix 3 into line with the revised statutory regime in Hong Kong (reflected, for example, in section 157B(1) of the Ordinance), they are nonetheless of importance.

(6)  Similarly, I do not think that the failure of the listing rules to specify any time limit within which articles of listed companies should be brought into conformity is sufficient to compel the contrary conclusion.

58. I therefore think that CYF was in principle required, under the Listing Rules, to ensure that its articles conformed to the provisions of paragraph 4(3) of Appendix 3.

(1)(b)  Does Bermuda law “provide otherwise”?

59. This leads on to the question whether Ms Chan is right in her submission that the effect of section 93(1) of the Bermuda Companies Act results in CYF being excused from having to ensure that its articles conform with this paragraph, because Bermuda law provides otherwise.

60. Section 93(1) of the Bermuda Act provides that:-

“Subject to its bye-laws the members of a company may at a special general meeting called for that purpose remove a director:

Provided that notice of any such meeting shall be served on the director concerned not less than fourteen days before the meeting and he shall be entitled to be heard at such meeting:

Provided further that nothing in this section shall have effect to deprive any person of any compensation or damages which may be payable to him in respect of the termination of his appointment as a director or of any other appointment with the company.”

61. The effect of this provision is clearly to leave it to the company’s bye-laws to specify the nature of the resolution required to remove a director, and also to specify the procedural steps to be taken (in terms of notice and other matters) when such a meeting is called, subject to it being compulsory for the director(s) concerned to be given 14 days notice of the meeting and for him to be given the opportunity to be heard at the meeting on the question of whether or not he should be removed.  It is also made clear that removal is without prejudice to a director’s right to claim such compensation as he may be entitled to for his loss of office.

62. Thus, subject to the constraints imposed by the provisos, a company is free to make such arrangements as it wishes to in relation to the question of removal of directors from office.  No constraints are imposed on the nature of the resolution that is required for this purpose. Thus, a Bermudan company can provide in its articles for such a resolution to be passed by a simple majority (an ordinary resolution), a three-quarters majority (a special resolution), or some other majority (say nine-tenths) or even unanimity.  What is clear, however, is that there is no compulsion for a Bermuda company to require something other than an ordinary resolution for the removal of a director.  In other words, to provide that an ordinary resolution will suffice is permissible (but not compulsory).

63. In the context of paragraph 4(3) of Appendix 3, however, the words “where not otherwise provided by law” must mean that there is some provision of law in the place of the listed issuer’s incorporation that provides that something other than an ordinary resolution is required for the removal of a director.  This follows, I think, from the fact that the purpose of the Appendix is, as I have already said, to provide for a degree of uniformity in the extent of rights afforded to shareholders of listed companies by their constitutions.  The consequence of this is that any exceptions should be recognised only where it is necessary to do so.  Where a jurisdiction has legislation that requires something other than an ordinary resolution to be passed in order to remove directors, it will be necessary to cater for this. But it is not necessary to do so where the other jurisdiction permits (without requiring) an ordinary resolution to suffice.  In such a case, it is left to the company concerned to decide what sort of resolution should be required.  It may choose to make it more difficult to remove a director, but it does not have to do so.  In such a case, there would be nothing in the foreign law that provides otherwise than that an ordinary resolution is enough.  Put another way, the foreign law is simply silent on the question, and makes no provision for some sort of resolution, other than an ordinary one, to be required.

64. I therefore do not think that Ms Chan’s suggestion that Bermuda law “provides otherwise” is valid.

(2)  Is the failure to amend the bye-law an act of CYF?

65. The next question for consideration is whether the result of the vote taken at the SGMs at which the amendment to Bye-law 86(4) was considered, and the consequent failure to effect the amendment, is to be regarded solely as an act of the shareholders of CYF, or an act (or lack of action) on the part of CYF itself.

66. As to this, Mr Sussex relied on the observations of Harman J in Re Unisoft Group (No 3) [1994] 1 BCLC 609, where he said (at pages 622g-623c):-

“It is important to remember that shareholders’ rights to deal with or vote their shares are separate from the rights of the company as a corporate entity and shareholders’ relationships with it. Shareholders are entitled to sell their shares, to vote their shares, to take any course they like in general meeting without regard to any other person’s rights or position. In my judgment the law is that a shareholder may act with malice in voting his shares against a particular resolution and there can be no objection to that …

In my judgment it is vitally important to hold that shareholders’ disputes concerning dealings with their shares are not the same as unfair conduct of the company’s business. Shareholders must be kept distinct from the company so far as their private position as shareholders is concerned.

It is of course obvious that a company may act or conduct itself in a manner affecting a shareholder’s rights in respect of his shares, for example the board may refuse to sanction a transfer of shares for improper reasons.  The action of the board is conduct of the affairs of the company and so, if damage is alleged, may raise the ground of ‘unfair’ prejudice, and a petition under section 459 [the English equivalent of our section 168A] may be presented to the court. Further, a shareholder by exercising his own private right to vote his shares may cause the company to act, by the passing of some resolution in general meeting, in a manner alleged to be unfairly prejudicial to some members. Again, it is not the act of the shareholder in voting that will found a petition but the result of that act if it produces action, or inaction, by the company. In my judgment the vital distinction between acts or conduct of the company and the acts or conduct of the shareholder in his private capacity must be kept clear.  The first type of act will found a petition under section 459, the second type of act will not.”

67. I think that the distinction which Harman J drew in that passage is a valid one, which is of importance in the context of these proceedings.  What it comes to is this: when a shareholder exercises his right to vote his shares in a particular way on a resolution put to the shareholders in general meeting, he is exercising his own private right, and in doing so is (generally speaking) free to act as he wishes.  The way in which he votes is not an act of the company, or the conduct of the affairs of the company, such as would found a section 168A petition.  However, when it comes to the collective decision arrived at by the general meeting after all votes cast are tallied, the position is different – that decision is a decision of the company, and any action or inaction that results from it is action or inaction by the company, and such action or inaction, if unfair and prejudicial to the interests of the shareholders or some part of them, can provide the basis for a petition under section 168A of the Ordinance.

68. It seems to me that this is simply a reflection of the well understood concept that a company can act by one of two organs – its board, or its shareholders in general meeting.  The allocation of the conduct of the company’s affairs between the two organs is a matter that will be addressed in the articles of association.  Where the board resolves on a course of action which is within its remit to determine, the consequent action taken is the action of the company.  Similarly, where a general meeting of shareholders resolves upon a matter that is within its role to determine, the decision of the meeting will result in action, or (as in this case) inaction, by the company.  It is common to describe the outcome of a vote taken at a general meeting of the company as the decision of the company in general meeting.  That description, in my view, accurately states the position – that the decision is the decision of the company, made by it, in accordance with its constitutional division of powers, through the vote of its shareholders in general meeting.

69. Thus, while a shareholder may generally be free to vote as he pleases on a resolution put before the company in general meeting, it remains necessary to recognise that the result of his doing so will be to cause the company to do (or refrain from doing) something – the doing (or not doing) of which is an act, not of the individual shareholder, or the shareholders collectively, but of the company itself.

70. Although Ms Chan submitted that not every resolution passed in a general meeting would result in an act or inaction by the company, and would not necessarily amount to the conduct of its affairs, and that whether or not a resolution for the amendment of the articles of association would involve the conduct of the affairs of the company would depend on the nature of the amendment proposed, so that where (as here) what was being considered and decided upon was the way in which the shareholders’ rights to remove directors, this was an affair of the shareholders and not the company, I do not think that this analysis is sound.

71. It is well established that the articles of association of a company constitute a contract between the shareholders inter se, and also between the company and the shareholders, the purpose of which is (inter alia) to regulate the relationship between them.  This is so both in respect of Hong Kong companies (see section 23(1) of the Ordinance) and Bermuda companies (see section 16(1) of the Bermuda Companies Act).  It must follow from this that an amendment to the articles of association (or the failure to amend them) involves a variation (or not, as the case may be) of that contract, to which the company is a party.  It must therefore, by its very nature, be a matter that falls within the concept of the “affairs of the company”.  Ms Chan was not able to point to any authority to suggest that a question of whether or not a company’s articles should be amended was somehow not “an affair of the company”.

72. Further, as Mr Sussex pointed out, that amendments to its constitution are an act of the company is made clear by the terms of section 168A(3), where it is made clear that it is the company (or specified corporation) that amends its articles, and imposes restrictions on its ability to make further changes where those articles have been amended by an order of the court under section 168A(2)(a)(iv).

73. I am therefore of the view that what is relevant for the purposes of these proceedings is not why the 3^rd to 8^th Respondents voted as they did, but what the effect of their vote was, in terms of action or inaction by CYF.  In my opinion, the consequence of the 3^rd to 8^th Respondents voting against the resolution for the amendment of Bye‑law 86(4) was that CYF thereby failed to amend its bye-laws so as to bring them into line with the requirements of paragraph 4(3) of Appendix 3 of the Listing Rules.

(3)  Was it enough for CYF to convene the SGMs?

74. It follows from this, I think, that (contrary to the submission made by Ms Chan) it cannot have been sufficient compliance with its Listing Rules obligations for CYF to have convened the meetings at which its shareholders voted on the proposed amendment to Bye-law 86(4).  The result of those meetings being that the resolution was, on each occasion, defeated, the consequence was that CYF had not amended its bye-laws as required by Appendix 3 of the Listing Rules, and CYF therefore remained in breach of its obligations, under the listing agreement and its undertaking to the Exchange, to observe the Listing Rules from time to time in force.

(4)  Was the failure to amend Bye-law 86(4) unfair?

75. The next broad question is whether or not CYF’s failure to comply with the Listing Rules was unfair.

(4)(a)  Not unfair because shareholders free to vote as they wish?

76. Ms Chan submitted that it was not unfair, for a number of reasons.  The first was that as shareholders, the 3^rd to 8^th Respondents were entitled to vote their shares as they pleased, free from any equitable constraints.  However, for the reasons which I have explained above, I do not think that the freedom of the 3^rd to 8^th Respondents to vote their shares as they saw fit, for their own reasons (even if it were absolute, which is open to doubt as there are authorities to suggest that when considering amendments to the articles, shareholders are required to exercise their votes in good faith and in the best interests of the company), is a relevant consideration here.  The point that Mr Sussex makes, in my view correctly, is that it is the act of CYF as a result of those votes, and not the votes themselves, that must be looked at from the point of view of fairness or otherwise.

(4)(b)  Are the 3^rd to 8^th Respondents’ reasons for voting relevant?

77. That being so, it follows that the motivation of Madam Yung in causing the 3^rd to 8^th Respondents to vote as they did is not relevant for present purposes.

(4)(c)  Did the 3^rd to 8^th Respondents have good reasons for voting as they did?

78. This also means that it is not, in my view, necessary or relevant to deal with the question of whether or not the 3^rd to 8^th Respondents had a proper basis for voting as they did.  Madam Yung’s evidence in this respect was that she did not think that it was appropriate, or in the interests of CYF, to allow Luck Continent to gain control of the board of CYF, for a variety of reasons relating to alleged conflicts of interest on the part of Dato Poh, and that she thought that it was better for CYF to remain under the control of Mr Cheng and its existing board.

79. The main complaint levelled against Dato Poh related to alleged claims that CYF had against Weike, another company of Dato Poh’s which (according to Mr Cheng and Madam Yung) was in breach of its contract under which it was to supply gaming machines and software to subsidiaries of CYF on the Mainland.  While I would accept that there is some evidence to suggest that this might be the case, there is contrary evidence tending to indicate that the CYF side was aware that the machines in question were already in China, under an earlier arrangement with Weike, that these had not yet been paid for, and that the contract on which the CYF side now relied to allege that Weike was in breach was in fact understood on both sides to be a means of enabling Weike to be paid for the machines previously supplied.

80. For present purposes, I say no more than that it seems to me that Madam Yung could genuinely hold the view that it was undesirable for Dato Poh or his associates to gain control of CYF.  But for the reasons which I have already explained, this is not relevant for the purposes of these proceedings.

(4)(d)  Is there scope for fairness to operate beyond the provisions of the articles in the case of listed companies?

81. I turn next to the suggestion by Ms Chan that there can be no room for unfairness such as to ground a section 168A petition arising from matters extraneous to the articles of association in the case of a publicly listed company.  This submission was substantially based on a number of English decisions, of which the most significant are perhaps observations by Lord Hoffman (when sitting at first instance and in the Court of Appeal) in Re Posgate and Denby (Agencies) Ltd [1987] BCLC 8, and Re Saul D Harrison & Sons plc [1995] BCLC 14, and also the observations of Jonathan Parker J in Re Astec (BSR) plc [1998] 2 BCLC 556.

82. Ms Chan submitted that the authorities showed that in order to superimpose equitable constraints on the exercise of the legal rights conferred by the articles, the petition had to satisfy the court that there was something more than the mere fact of the association as members of the company.  While the circumstances in which such equitable considerations might arise was not closed, they would typically involve considerations of a personal character between one shareholder or group of shareholders and another, which would make it unjust for one or other group to insist on their legal rights.

83. Thus, in Re Posgate & Denby (Agencies) Ltd [1987] BCLC 8, Hoffman J said, at page 14d-f:-

“Although the answer to this question must in each case depend on the particular facts, it is as well to recall that in Ebrahimi v Westbourne Galleries Ltd [1973] AC 360, Lord Wilberforce said that in most cases the basis of the association would be ‘adequately and exhaustively’ laid down in the articles. The ‘superimposition of equitable considerations’ requires, he said, something more. This was said in the context of the ‘just and equitable’ ground for winding up, but in my judgment it is equally necessary for a shareholder who claims that it is ‘unfair’ within the meaning of s.459 for the board to exercise powers conferred by the articles to demonstrate some special circumstances which create a legitimate expectation that the board would not do so. Section 459 enables the court to give full effect to the terms and understandings on which the members of the company became associated, but not to rewrite them.”

84. In Re Saul D Harrison & Sons plc [1995] 1 BCLC 14, Hoffman LJ put what was meant by “something more” in this way (at pages 19a-20e):-

“Not only may conduct be technically unlawful without being unfair: it can also be unfair without being unlawful. In a commercial context, this may at first seem surprising. How can it be unfair to act in accordance with what the parties have agreed? As a general rule, it is not. But there are cases in which the letter of the articles do not fully reflect the understandings upon which the shareholders are associated. …

Thus the personal relationship between a shareholder and those who control the company may entitle him to say that it would in certain circumstances be unfair for them to exercise a power conferred by the articles upon the board or the company in general meeting. … It often arises out of a fundamental understanding between the shareholders which formed the basis of their association but was not put into contractual form, such as an assumption that each of the parties who has ventured his capital will also participate in the management of the company and receive the return on his investment in the form of salary rather than dividend. These relationships need not always take the form of implied agreements with the shareholders concerned; they would enure for the benefit of a third party such as a joint venturer’s widow. But in Ebrahimi v Westbourne Galleries Ltd Lord Wilberforce went on to say:-

‘It would be impossible, and wholly undesirable, to define the circumstances in which these considerations may arise. Certainly the fact that the company is a small one, or a private company, is not enough. There are very many of these where the association is a purely commercial one, of which it can safely be said that the basis of the association is adequately and exhaustively laid down in the articles. The superimposition of equitable considerations requires something more…’

Thus in the absence of ‘something more’, there is no basis for a legitimate expectation that the board and the company will not exercise whatever powers they are given by the articles of association.”

85. Mr Sussex did not, I think, dissent from the suggestion that it was necessary to identify “something more” before it could be said that there was unfairness in the company doing (whether by its board or in general meeting) what it was permitted to under the articles of association.  He identified as the “something more” in this case, the obligations assumed by CYF under the Listing Agreement, the terms of which were publicly accessible, and which governed the continued listing of the company, coupled with the importance, which would be readily understood by the company and all its shareholders, attaching to the continued existence of its listing, as the mechanism by which shareholders who acquired shares in the company could reasonably readily realise their investments through the Exchange.

86. Ms Chan, however, countered that in the case of a publicly listed company, there could be no room for equitable considerations or constraints to be imposed.  That this was so, she said, was stated by Vinelott J in Re Blue Arrow plc [1987] BCLC 585, where he said (at page 590f-h):-

“… No doubt there are cases where a legitimate expectation may be inferred from arrangements outside the ambit of the formal constitution of the company, but it must be borne in mind that this is a public company, a listed company, and a large one, and that the constitution was adopted at the time when the company was first floated on the Unlisted Securities Market. Outside investors were entitled to assume that the whole of the constitution was contained in the articles, read, of course, together with the Companies Acts. There is in these circumstances no room for any legitimate expectation founded on some agreement or arrangement made between the directors and kept up their sleeves and not disclosed to those placing the shares with the public through the Unlisted Securities Market.”

87. She also referred to, and emphasised, the views expressed by Jonathan Parker J in Re Astec (BSR) plc [1998] 2 BCLC 556, where he said (at page 588d-f):-

“Thus, as I read these two authorities [Ebrahimi and Saul D Harrison], in order to give rise to an equitable constraint based on ‘legitimate expectation’ what is required is a personal relationship or personal dealings of some kind between the party seeking to exercise the legal right and the party seeking to restrain such exercise, such as will affect the conscience of the former. In my judgment, in the absence of a personal relationship or personal dealings of that kind a shareholder can reasonably and legitimately expect no more than that the board of the company will act in accordance with its fiduciary duties and that the affairs of the company will be conducted in accordance with its articles of association and with the Act. Such expectations merely affirm the existence of the shareholders’ legal rights. They do not constrain the exercise of those rights.”

And at page 589a-b, he went on to say:-

“In my judgment, as the authorities stand today, the concept of ‘legitimate expectation’ as explained by Hoffman LJ in Re Saul D Harrison & Sons plc can have no place in the context of public listed companies. Moreover, its introduction in that context would, as it seems to me, in all probability prove to be a recipe for chaos. If the market in a company’s shares is to have any credibility members of the public dealing in that market must it seems to me be entitled to proceed on the footing that the constitution of the company is as it appears in the company’s public documents, unaffected by any extraneous equitable considerations and constraints.”

He went on to reject the suggestion that there could be any expectation that the Listing Rules (or other codes of conduct) would be complied with, since he had rejected the notion of legitimate expectations arising in the context of publicly listed companies.

88. Ms Chan also referred to the views expressed by Arden J (as she then was) in Re Benfield Grieg Group plc where she rejected an attempt to suggest that equitable constraints could arise out of assurances allegedly given by the directors of a company, on the basis that it was no part of the function of the directors to give such assurances, that it was ultra vires for them to do so, and in consequence, such assurances could not affect the company.

89. On the basis of these authorities, Ms Chan submitted that there could not be any circumstances in which there could be unfairly prejudicial conduct in respect of a publicly listed company that fell outwith the ambit of its articles of association.  Or, put another way, the only form of unfairly prejudicial conduct that could arise in respect of a publicly listed company would be conduct that was contrary to its articles.

90. With respect, I do not think that this is right.  While I would readily accept that it would not be appropriate to import concepts of unfair prejudice arising out of private arrangements between one shareholder and others, or between one shareholder and the board, in the case of publicly listed companies, given that such private arrangements are inherently unlikely to be known to other shareholders and the investing public, I would not go so far as to accept that there could never be circumstances in which acts of the company, although strictly in accordance with the articles of association, could not also be unfairly prejudicial to the shareholders or some part of them.

91. As Mr Sussex pointed out, Jonathan Parker J did not refer, when expressing the views that he did, to the earlier decision of Dillon J in Re St Piran Ltd [1981] 1 WLR 1300, where (in the context of an application to strike out a petition seeking a winding up on the just and equitable ground), Dillon J said at page 1307F-G:-

“The provisions of the City Code set out a code of conduct which has been laid down by responsible and experienced persons in the City as being fair and reasonable conduct in relation to companies which like St Piran have obtained the benefit of a listing on the Stock Exchange. If the directors of a publicly quoted company or the principal shareholders in such a company choose to flout that code of fair and reasonable conduct and to ignore without good reason the consequent directions of the City Panel, and minority shareholders are injured by the withdrawal of the Stock Exchange quotation for the company’s shares, then it seems to me that it could very well be just and equitable in the natural sense of those words that the company should be wound up. …”

92. Moreover, in the Astec case, the listing rule alleged to have been breached did not yet apply to the company, the City Code did not apply to the company, and the other code relied on (the Cadbury Code) was voluntary in nature.  There was, moreover, no suggestion that the company’s listing in that case was in any way in jeopardy.

93. While, as I have accepted, private understandings or arrangements between shareholders have no room to operate in the context of publicly listed companies, in this case, it is not suggested that there was some private arrangement or understanding of this sort.  On the contrary, what is said is that CYF has agreed to be bound by the Listing Rules, the contents of which are readily accessible to the public, and to shareholders of listed companies.  The concerns expressed by Jonathan Parker J in Re Astec to the effect that to permit private understandings to come into play in the context of listed companies might be a recipe for chaos would, for this reason, appear to be inapposite in the case of compliance with the Listing Rules.  In addition, as Mr Sussex pointed out, the Listing Rules and the expectation that listed companies will abide by them so as not to jeopardise their listing are likely to form a part of the premise on which investors acquire shares in listed companies.

94. In these circumstances, I do not think that the availability of relief under section 168A is shut off by considerations such as those ventilated in Re Astec.

(4)(e)(i)  Can Luck Continent rely on this form of unfairness on its petition?

95. That being so, is it open to Luck Continent to contend that it is unfair for CYF to allow itself to remain in breach of the Listing Rules where this might affect its continued listing?  Ms Chan says it is not, since none of the bases put forward by Mr Sussex for regarding CYF’s breach of the Listing Rules as unfair to the shareholders has been set out in Luck Continent’s petition, and it is not open to a petitioner under section 168A to rely on matters that do not appear in its petition.

96. With respect, I think that this submission takes requirements of formality too far.  This is not a case in which some completely different form of allegedly unfairly prejudicial conduct, not mentioned in the petition, is sought to be relied upon at trial.  The essential factual allegations – that CYF has agreed to be bound by the Listing Rules, and is alleged to be in breach of them in respect of the failure to amend Bye‑law 86(4) are to be found in the petition.

4(e)(ii)  Is there a proper basis for saying that it was unfair for CYF to fail to amend Bye-law 86(4)

97. This leads on to the question of whether or not it is, in fact, unfair for CYF to remain in breach of paragraph 4(3) of Appendix 3 of the Listing Rules.  Mr Sussex submits that, accepting that unfairness in this sense must mean (as Lord Hoffman said in O’Neill v Phillips [1999] 1 WLR 1092 unfairness in a sense recognised by general equitable principles, rather than some indefinite notion of unfairness according to the views of the particular court dealing with the matter, that it was unfair in the necessary sense for this state of affairs to continue.  This was because any company that obtains a listing on the Exchange must be understood to implicitly promise its shareholders that it will comply with the Listing Rules so as not to jeopardise its continued listing, which is the fundamental premise on which its shareholders will have become shareholders in the first place.  Here, the implicit promise is made by CYF itself to its shareholders, and can be regarded as:-

(1)  a collateral contract with its shareholders, or

(2)  an agreement with the Exchange made for the benefit of both the company and its shareholders, so as to make it inequitable for the company to break that agreement so as to prejudice the interests of the shareholders; or

(3)  an implied promise to the shareholders arising out of the listing agreement and undertaking, from which CYF is stopped from resiling.

98. For my part, I think that the second of these analyses provides a valid basis for contending that it would be unfair for CYF to remain in breach of the Listing Rules.  As Lord Hoffman pointed out in O’Neill v Phillips (albeit in the context of what was a quasi-partnership company), that it is not necessary that promises should be independently enforceable as a matter of contract, so that promises may be binding in justice an equity even though not enforceable as a matter of law, for example because made in favour of a third party.  In this case, it seems to me that in agreeing with the Exchange to comply with the Listing Rules, the company can properly be regarded as having done so for the benefit of its shareholders as much as for itself, so as to entitle its shareholders to complain that it is unfair for the company to breach those rules where this would have prejudicial consequences for the shareholders.

(4)(e)(iii)  Does the failure by Luck Continent to cause Bye-law 86(4) to be amended when it could have done so make a difference?

99. So far as Ms Chan’s suggestion that there is no unfairness in this case, as Luck Continent could have taken steps to bring about an amendment to Bye-law 86(4) at an earlier stage, when it had a shareholding that would have enabled it to pass a special resolution, I do not think that this is a good argument.  There is nothing to suggest that Luck Continent had at any stage deliberately decided against seeking an amendment to Bye-law 86(4).  At best, the situation would appear to be that the need for an amendment to the bye-law was never noticed or focussed on.  In such circumstances, I do not think that the unfairness identified by Mr Sussex is negated.

100. I am therefore satisfied that the failure of CYF to amend Bye‑law 86(4) was a matter which was unfair, in the sense required by section 168A.

(5)  Was the failure to amend Article 86(4) prejudicial?

101. Was it also prejudicial?  I am satisfied that it was.  The correspondence between CYF and the Exchange strongly suggests that the suspension from trading of CYF’s shares will not be lifted until such time as all regulatory concerns have been dealt with satisfactorily.  In its correspondence with CYF, the Exchange has clearly identified the continued failure to amend Bye-law 86(4) as one of the regulatory concerns that needs to be addressed.  It would therefore seem that if the bye-law remains in its present form, CYF’s shares are likely to remain suspended.  This is a matter which is self-evidently prejudicial to CYF’s shareholders, for reasons which I have already explained.

(6)  Does the change in control of the board make a difference?

102. I am therefore satisfied that there has been unfairly prejudicial conduct on the part of CYF in relation to its affairs, so as to make it possible for the court to order the amendment to Bye-law 86(4) that is sought.  Does the fact that Luck Continent has now obtained control of CYF’s board make a difference?  I do not think that it does.  Until such time as the bye-law is amended so as to render it in conformity with the requirements of Appendix 3 of the Listing Rules, the prejudice to CYF’s shareholders is likely to continue.  The fact that Luck Continent now has control of CYF’s board will not make it possible to secure the passing of the special resolution required to effect the amendment, as the 3^rd to 8^th Respondents remain in a position to block such a special resolution.  There can be no certainty as to how they will vote their shares in future, and in these circumstances, it seems to me that it would be right to avoid that uncertainty, and bring an end to the unfairly prejudicial conduct by ordering that Bye-law 86(4) be amended as prayed for by Luck Continent.

Disposition and costs

103. I shall therefore make an order in terms of paragraph 1(a) of the prayer to the petition.

104. So far as costs are concerned, the parties are asked to restore the matter for hearing, initially for a 30 minute appointment for the purpose of giving appropriate directions for a hearing to determine the costs of these proceedings.

Luck Continent’s alternative case 

105. As I have acceded to Mr Sussex’s primary case, it is not necessary for me to express any concluded view as to Luck Continent’s alternative case, and I would prefer not to say too much in relation to it as Mr Cheng has been charged and will be tried on offences of dishonesty in relation to the 17^th Floor Transaction, other than to say that while the evidence relied upon by Luck Continent (and set out in Mr Sussex’s written closing submissions) would appear to establish that Mr Cheng has a case to answer in relation to the allegations that he was interested in and obtained a benefit from that transaction, there is other evidence (not least Dato Poh’s own evidence as to his relationship with Mr Kenny Nam, and his agreement to pay a very substantial amount of money to him, which would suggest that Mr Kenny Nam was in a position to and may have been acting on his own account in relation to the dealings in that property.

106. However, it is also the case I do not think that this argument really adds anything to the primary case advanced by Mr Sussex – although it might be regarded as unsatisfactory from Luck Continent’s point of view to be unable to remove a director in whom it had no confidence, I do not see, having regard to the fact that the bye-laws call for a special resolution for removal, that it would be unfair that they could not do so, if it were (contrary to the view I have come to) fair for Bye-law 86(4) to remain unaltered.  The real unfairness in this case lies, I think, in the failure of CYF to amend Bye-law 86(4) and thereby to jeopardise its listed status, to the prejudice of all of its shareholders.  In other words, the unfairness arises not from the fact that Bye-law 86(4) is in the terms that it is, but from the fact that those terms are contrary to what is required by the Listing Rules, which CYF has agreed to observe, for the benefit of its shareholders as well as itself.