KWOK PING SHEUNG WALTER v. SUN HUNG KAI PROPERTIES LTD AND OTHERS

cacv 145/2008

in the high court of the

hong kong special administrative region

court of appeal

civil appeal no. 145 of 2008

(on appeal from HCA NO. 857 of 2008)

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J U D G M E N T

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Hon Rogers VP:

1.  This is an application for a temporary injunction pending an appeal to this court from a judgment of Madam Justice Kwan, given on 23 May.  This action is brought by Mr Walter Kwok against the company, Sun Hung Kai Properties Limited, and all the other directors of that company.

2.  The claim in the action is for a number of declarations, the first of which is a declaration that the proposal by Thomas Kwok and Raymond Kwok that the board should, on 15 May, consider removing the plaintiff from his position as chairman and chief executive and re-designating him as a non-executive director constitutes a breach of the agreement.  There are other declarations which go to the same effect and then there is a declaration that Raymond Kwok and Walter Kwok and each of the 4th to 17th defendants - those are the other directors of the company - are not entitled to exercise their vote at any board meeting to terminate the appointment of Walter Kwok as chairman and chief executive and/or to re-designate him as a non-executive director of Sun Hung Kai Properties Limited on the grounds alleged in their notes to the directors of Sun Hung Kai Properties of 5 May 2008 and 13 May 2008.

3.  Then there are two injunctions that are sought.  The first is against the directors to prevent them from voting at any board meeting to terminate the appointment of Walter Kwok as chairman and chief executive and/or to re-designate him as a non-executive director of Sun Hung Kai Properties Limited on the ground alleged in their notes to the directors of the company of 5 and 13 May, and then there is sought an injunction against the company itself from implementing any resolution so to remove and re-designate Mr Walter Kwok on the grounds alleged in the notes to the directors of the company.

4.  This matter has had some protracted publicity over a number of months and one can only say that that is regrettable.  The application in this action was first made to the duty judge on 15 May and he granted an injunction against the directors from voting at the board meeting on 15 May to terminate the appointment of the plaintiff as chairman of the board of directors and chief executive of the company and/or to re-designate him as a non-executive director of the company, and then there was an injunction in similar terms against the first defendant to prevent it from implementing that.

5.  The matter then came before the companies judge, Madam Justice Kwan, on the return date on 23 May, that is, last Friday.  Kwan J set aside the injunction and dismissed the renewed application for an injunction.  She did so on the basis that the plaintiff did not have an arguable case and that in her view the balance of convenience, in any event, dictated that there should be no injunction and that no irreparable damage had been shown to the plaintiff.  Such are the delays in the law it has taken until this morning for the matter to come before this court.

6.  Mr Tong, SC, who appears on behalf of the plaintiff, has sought an injunction pending an appeal to this court and this court has considered that instead of that application being made before a single judge, it should be made before the Court of Appeal.  Hence, this court has sat in open court as the Court of Appeal because the decision on this application for a temporary injunction is, as Mr Tong himself said, likely to be decisive of a number of matters, if not the whole case.

7.  The action by the plaintiff is based, first of all, on an alleged contract and it arose in this way.  There was to be a board meeting on 18 February of this year at which the termination of the plaintiff’s appointment as chairman and chief executive of the 1st defendant, the company, was to be considered.  There has been no discussion as to the basis of that, but it is pertinent to point out that under the Articles of the company, Article 125 of the Articles provides that:

“The Board may from time to time elect or otherwise appoint a Director to be Chairman or Deputy Chairman and to determine the period for which each of them is to hold office.  The Chairman or, in his absence, the Deputy Chairman shall preside at meetings of the Board, but if no such Chairman or Deputy Chairman be elected or appointed, or if, at any meeting, the Chairman or Deputy Chairman is not present within five minutes after the time appointed for holding the same, the Directors present shall choose one of their number to be Chairman of such meeting.”

8.  That deals with the appointment of the chairman of the board and that, clearly, is a matter for the board itself.  The question of the managing directors is dealt with in Articles 117 and 118.  117 reads:

“The Board may, from time to time, appoint any one or more of its body to the office of Managing Director, Joint Managing Director, Deputy Managing Director or other Executive Director, and/or such other office in the management of the business of the company as it may decide for such period and upon such terms as it thinks fit and upon such terms as to remuneration as it may decide in accordance with Article 101.

118 reads:

“Every Director appointed to an office under Article 117 hereof shall, but without prejudice to any claim for damages for breach of any contract of service between himself and the Company, be liable to be dismissed or removed therefrom by the Board.”

9.  It was against that background that there was to be a board meeting on 18 February.  By a letter dated that day, the plaintiff wrote to the board of directors as follows:

“Dear Sirs,

(1)        I apply to the Board of Directors from my leave of absence as Chairman and Chief Executive.

(2)        During the period of absence, I shall neither undertake, get involved with the discharge of any executive duties nor will I make any commitment of any nature whatsoever on behalf of Sun Hung Kai Properties Limited and any of its subsidiaries.

(3)        I shall relinquish such duties as Chief Executive during the leave of absence to the two Deputy Chairmen and Managing Directors.

(4)        To ensure a smooth running of projects currently managed by me, such projects shall be referred to the Executive Committee of the Board of Directors for directions and decisions.

(5)        I shall consult doctors regarding my health and, at the end of the three-month period from the date hereof, I shall procure medical opinions from at least two competent medical experts, one of whom shall be nominated by Thomas Kwok and Raymond Kwok, as to my condition and state of health.

(6)        I shall ask the Board of Directors to consider these medical opinions and, if necessary, procure a further medical opinion from a medical expert to be nominated by the Board covering such matters as the Board may require.

(7)        I shall abide by the Board’s decision on the date of my resumption of duties based on medical opinions referred to in points (5) and (6) above.”

10.  This letter was, naturally, put before the board at the meeting, and the minutes of the board meeting of that date reflect that and they reflect the terms of the letter.  Then it is said that:

“On the proposal of [one of the independent non-executive directors] and seconded by a number of Directors, the Board unanimously resolved that all arrangements as provided in the Letter, a copy of which is attached to form part of these minutes, be accepted and that all such arrangements would become effective with immediate effect.”

11.  Then it is said that the 7th resolution was that in view of the receipt of the letter, the directors unanimously agreed that discussion on the proposed appointment of Madam Kwong Siu Hing, that is the mother of the three protagonists in this case, as an additional non-executive director of the company would be postponed to the next board meeting, scheduled to be held on 6 March 2008.

12.  Paragraph 8 of the minutes reads:

“As a result of the receipt and acceptance of all the terms of the Letter, [one of the independent non-executive directors] proposed, and [another] seconded, and the Directors unanimously agreed that the motion “that the term of office of the incumbent Chairman of the Board of Directors and Chief Executive, Mr Walter Kwok Ping-Sheung, shall terminate on 18 February 2008” would be deferred indefinitely.”

13.  As Mr Huggins, SC, who appeared on behalf of the second and third defendants pointed out, there is no reference in that to the initial grounds upon which the termination of the appointment of the plaintiff as chairman were considered.  So the fact remains that the board accepted the proposal put forward by the plaintiff that he should have 3 months’ leave of absence and no more.  There is nothing to indicate in that that there is any express contractual provision, nor implied contractual provision, that the plaintiff would remain as chairman after 18 May, nor that the only grounds upon which his appointment as chairman should be considered were the medical grounds.

14.  The judge below, Kwan J, came to the conclusion on this aspect of the case that:

“The claim in tort is dependent on the assumption that the alleged agreement exists.  It follows that I cannot be satisfied that there is a serious question to be tried on the cause of action in tort.”

15.  In my view, the judge was quite correct.  There is simply no basis upon which it could be said that there was any contract, either by the company or by the other directors, that the plaintiff would necessarily remain as chairman and an executive director following 18 May.

16.  The other aspect of the plaintiff’s claim is that it is said that directors are acting from some improper motive.  I will say at once that I entirely agree with what Kwan J has said the courts are not here to decide Mr Walter Kwok’s medical condition but I would go further.  I would say that there is no evidence to support the allegations of improper motive on the part of the directors.  All that is relied upon is incidents of the second and third defendants inquiring into the plaintiff’s medical condition.  What is relied upon shows no more than concern by brothers for their elder brother, who had been kidnapped and held in the most terrible way.  But to elevate that to an improper motive seems to me to be quite wrong.  In my view there is absolutely no basis for the plaintiff to allege that the directors and the second and third defendants are seeking to remove him for some improper reason.

17.  Mr Tong this morning has complained about the conduct of a board meeting on 8 May.  This court has been shown a transcript of that board meeting.  All that shows is that the board meeting was adjourned for another week for the matters that were to be raised on that occasion to be dealt with then, when they were going to be dealt with.  It has to be remembered that the board meeting on 8 May was called by the plaintiff himself, when a board meeting had already been called for 15 May.  Again, in my view, there is absolutely no ground for complaint in this respect.  Simply there was an adjournment of the meeting.

18.  One then turns to the basis of this application.  It is said that the plaintiff has a right of appeal to this court.  That, of course, is clear.  He does have a right of appeal to this court.  But it does not necessarily mean that the court will impose an injunction pending that appeal.  The same considerations apply that the plaintiff has to show that there is an arguable case and that the balance of convenience dictates that in the meantime the plaintiff should get this temporary relief.

19.  But I go further than that.  I consider that the relief sought here is simply something which this court cannot give.  The reason for that is that this whole matter is a matter of internal management by the board.  What the board apparently is considering is who should be their chairman, and who should be their chairman is, first and foremost, a matter for the board itself.  This court cannot dictate to a board who should be its chairman.  This court cannot dictate to a company who should be its executive directors.  Two hundred years ago, Lord Eldon said in the case of Carlen v Drury, (1812) 1 Ves & B 154:

“the court could not undertake the management of every brewhouse and playhouse in the kingdom.”

20.  That is a fundamental principle of company law.  Lord Davey, 100 years ago, referred in the case of Burland v Earle [1902] AC 83 at 93, a case referred to by the judge below:

“It is an elementary principle of law relating joint stock companies that the court will not interfere with the internal management of companies acting within their powers, and in fact has no jurisdiction to do so.”

21.  I have considered in this judgment the Articles of the company and they make it perfectly clear that the choice of chairman and the choice of the executive directors is a matter for the board.  In those circumstances, I have the gravest of doubts as to whether this court would ever grant any injunctions, whether after a final trial or otherwise, that are sought in this case.

22.  For these reasons, this application should be dismissed.

Hon Le Pichon JA:

23.  I agree.

Hon Rogers VP:

24.  The application is dismissed with costs.