HUI MEI LEI v. CHOY SHUEN KI AND ANOTHER

HCMP 132 & 133/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO132 OF 2014

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D E C I S I O N

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1.  I have before me two originating summonses concerning two related companies, Top Wins International Limited and Billion Link Properties Limited; they are together the holding companies of three other companies which operate a business of manufacturing and trading of noodles.

2.  In the case of Top Wins, Madam Hui Mei-lei is the plaintiff.  Top Wins was incorporated in June 2012.  Hui is the majority shareholder, holding 75 per cent.  The 1^st defendant, Choy Shuen-ki and the 2^nd defendant, Tung Ching-nga, are minority shareholders, holding 12.5 per cent interest each in the company.  All three of them are the directors of the company.

3.  In August 2013, Choy informed his colleagues that he would, because of his other commitments, no longer come back to the office, though he could still be contacted through email.  Since then there have been difficulties in the operation of the business because the cooperation of Tung in signing the cheques has not been forthcoming. 

4.  Hui, as majority shareholder, wishes to appoint additional directors so that resolutions can be passed by the board for the operation of the underlying business. 

5.  Under Article 62 of the Articles of Association of Top Wins, the directors can appoint an additional director.  Under Articles 63 and 64, the members may by ordinary resolution remove a director and appoint another person in his place.

6.  Under the requirement of Section 111 of the Companies Ordinance, the first AGM of Top Wins should be held within 18 months of its incorporation, that is 14 December 2013. 

7.  On 28 October 2013, Hui gave notice to convene a board meeting on 12 November 2013.  Neither Choy nor Tung attended, but Tung apparently sent a proxy.  As no legal basis was shown for attending a board meeting by proxy, the meeting could not be held as the requisite quorum under Article 67 of the Articles was two directors.

8.  On 21 November 2013, Hui, as shareholder, requisitioned an EGM under Section 113 of the Companies Ordinance.  She then, as director, gave notice to convene a board meeting on 6 December 2013 to consider convening an EGM.  Choy and Tung did not attend, but asked for another date.  Thereupon, Hui asked them to propose a date in the next seven days, but there was no reply.

9.  On 23 December 2013, Hui, as shareholder, sought to convene an EGM on 8 January 2014.  Again, neither Choy nor Tung turned up. No EGM could, as a result, be held, as the requisite quorum of two members, prescribed in Article 31 of the Articles, was not present. 

10.  By a letter dated 10 January 2014, Hui gave notice to Choy and Tung that she was left with no alternative but to apply to the court for an AGM to be called and held.  Again, there was no reply.

11.  Hui therefore issued the originating summons herein, dated 21 January 2014, returnable this morning.  It was supported by Hui’s affirmation, which was filed and sent to Choy and Tung by post by way of service on the same date.  There was no reply and no affirmation filed by the defendants. 

12.  By a letter dated 26 February 2014, the defendant’s solicitors wrote to say that the defendants should have 28 days from the date of acknowledgement of service filed on 11 February 2014 to file their affirmation, that is 11 March 2014, and asked for an adjournment of the hearing this morning. 

13.  That is not a correct position to take, since under Order 28, rule 1A(4), it is provided that:

“Where a defendant who has acknowledge service wishes to adduce affidavit evidence he must within 28 days after service on him of copies of the plaintiff’s affidavit evidence under paragraph (3) file his own affidavit evidence in the Court and serve copies thereof on the plaintiff and on any other defendant who is affected thereby.”

14.  I see no justification, in the circumstances, why the hearing should be adjourned.  The company is already in default of the obligation to hold an AGM.  The defendants have failed to respond to the effort of Hui, the other director and the majority shareholder, to convene a general meeting.

15.  There are other proceedings between the parties, including applications to set aside statutory demands, a District Court civil action commenced by Choy against Hui and her husband, and a High Court action commenced by Tung against Hui and her husband.  The parties seem to be locked in a bitter dispute.

16.  It is impracticable for Hui to have a meeting given the quorum requirement and Choy and Tung have, as far as I can see, done nothing to assist in the holding of a meeting. 

17.  The proposed resolutions to be considered at the general meeting are set out in the schedule to the originating summons.  They consist of a proposal to consider and approve the profit and loss account and balance sheet of the company, the proposal to appoint two additional directors and the proposal to appoint auditors and fix their remuneration.

18.  On the evidence before me, there is nothing oppressive or untoward in these resolutions.  I am satisfied that I should make an order under Section 111.

19.  Turning to the other case, Billion Link Properties Limited, it follows a similar pattern.  Billion Link Properties Limited is a company incorporated in May 2007.  Tsoi Man-chi, the plaintiff, is the husband of Hui Mei-lei, who is the plaintiff in the case of Top Wins. 

20.  Tsoi Man-chi holds 75 per cent of the shares in the company.  Choy and Tung are the 1^st and 2^nd defendants, holding 11 per cent each.  The 3^rd defendant, Hui Mei-yi, is the younger sister of Hui Mei-lei, holding 3 per cent. Tsoi Man-chi and Choy have been the only two directors of this company.

21.  On 28 October 2013, Tsoi Man-chi requisitioned an EGM for the purpose of appointing additional directors.  He then convened a board meeting on 15 November 2013 to consider the requisition.  Choy did not turn up, but sought to send a proxy without stating the legal basis for doing so.  As there was no quorum, the board meeting could not be held.

22.  On 19 November 2013, Tsoi Man-chi sent a notice to convene an EGM on 4 December 2013.  One day before the proposed date of meeting, Choy and Tung’s solicitors asked for another date to be fixed for the EGM.  Choy and Tung did not attend the meeting on 4 December.  The plaintiff’s solicitors then wrote to ask Choy and Tung to revert with a proposed date for the meeting, but there was no reply.  A letter before action dated 10 January 2014 was sent to the defendant, but again there was no response.

23.  As with the case of Top Wins, the originating summons and affirmation were filed on 21 January 2014.  Nothing was heard from the defendants until their solicitors’ letter of 26 February asking for an adjournment on the basis that they had until 11 March to file evidence.  As I have already said, that was not a valid basis for seeking an adjournment.

24.  In these circumstances, it seems to me that the plaintiff has shown that it was impracticable to call a meeting.  The board is deadlocked. 

25.  The plaintiff is the 75 per cent majority shareholder of the company.  The proposed resolution set out in the schedule to the originating summons is for one additional director to be appointed.

26.  On the evidence before me, I think a meeting should be ordered under Section 114B of the Companies Ordinance. 

27.  There will therefore be an order in terms of paragraphs 1 to 4 of the originating summons in the case of Top Wins and also paragraphs 1 to 4 of the originating summons in the case of Billion Link Properties Limited. 

(Discussion re costs)

28.  I will order costs to be paid by the defendants to the plaintiff, to be taxed if not agreed.

(Discussion re costs)

29.  In the case of Billion Link Properties Limited, the order will be against all defendants.