WU YI CONSTRUCTION CO LTD v. BIG ISLAND ASIA LTD AND ANOTHER

HCMP 1058/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1058 OF 2009

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D E C I S I O N

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1.  This is an originating summons issued under section 114B of the Companies Ordinance, Cap. 32 for an order that an extraordinary general meeting of FBC Construction Company Limited (“the Company”) be convened, with a direction that one member present in person or by proxy be deemed to constitute a quorum.  The originating summons was issued on 5 June 2009 by Wu Yi Construction Company Limited, which holds 60% of the shares in the Company.  The 1^st respondent, Big Island Asia Limited, is the 40% shareholder.  The  Company is the 2^nd respondent. 

2.  The proposed extraordinary general meeting is to consider passing resolutions that the applicant be authorised to represent the Company or to appoint legal representative to represent the Company in HCCW No. 397 of 2008 and that the applicant be authorised to give instructions to the Company’s legal representative in the conduct of the petition.  The winding-up petition was presented by BPL Investment Management Limited (“BPL”) on 1 September 2008 on the basis of a demand for a debt in the total sum of $142,100 allegedly incurred in 2002.  BPL, the 1^st respondent and Big Island Construction Company Limited are companies owned and controlled by Ben Lee.  Ben Lee was and is, it would appear, a director of the Company.

3.  On 12 June 2009, the 1^st respondent filed an acknowledgment of service stating that it does not intend to contest the originating summons.  Nevertheless, submissions were made on its behalf contending that:

(1)  there is no necessity for a general meeting to be convened to consider and pass the proposed resolutions.  The directors of the Company could have passed the resolutions to similar effect and as the majority of directors are representatives of the applicant, there should be no practical difficulty for such a board meeting to be held and the directors to pass the proposed resolutions; and

(2)  it is not impracticable for a general meeting to be convened to consider the proposed resolutions.

4.  At the outset of the hearing today, I understand from the parties that the 1^st respondent has no objection to an order in terms of paragraphs 1 to 3 of the originating summons but there is no agreement on costs.

5.  Mr Malcolm Kemp for the 1^st respondent proposed that there should be no order as to costs.  This was not accepted by the applicant’s counsel, Mr Lawrence Ng.  Hence, I would need to make a ruling on costs and in doing so consider the submissions made by Mr Kemp as to the merits or otherwise of the originating summons.

6.  Under article 7 of the articles of association, it is provided that the directors shall hold office for a term of one year and at the annual general meeting to be held in the year following, they shall retire from office but be eligible for re-election.  It is apparent from the minutes of the annual general meeting for the years of 2005, 2006 and 2007 they were attended only by the applicant.  The annual general meetings were inquorate, it being provided in article 20(a) that the quorum for all general meetings shall be two members either personally present or by proxy who held in their own rights a total of over 50% of paid-up capital.  The resolutions purportedly passed in these general meetings that all the directors have retired in accordance with article 7 and were re-elected as directors are of doubtful validity.  The fact that Ben Lee and the 1^st respondent have not challenged the directors’ right to hold office is neither here nor there.

7.  So I agree with Mr Ng’s submission it would be prudent to hold a general meeting to consider and pass the proposed resolutions.  I reject the 1^st respondent’s contention there is no necessity to hold a general meeting for this purpose.

8.  I turn to consider whether it is impracticable to hold a general meeting.

9.  The applicant’s solicitors had on 25 May 2009, sent draft written shareholders’ resolutions to the 1^st respondent and requested the 1^st respondent to sign the resolutions so that they could be passed pursuant to section 116B.  The 1^st respondent declined to do so, taking the view there is no ground for the Company to oppose the creditor’s petition to wind up the Company.

10.  Mr Kemp submitted today that the 1^st respondent cannot sign the shareholders’ resolutions due to a conflict of interest.  It was further contended on behalf of the 1^st respondent that it did not attend the annual general meetings for 2005 to 2007 as it had never received notices for these meetings and it was asserted in Mr Kemp’s submissions that the 1^st respondent would have attended a meeting to consider the proposed resolutions although it might abstain from voting.

11.  I reject these contentions as well, as they were made without evidence in support.

12.  I am satisfied on the evidence before me it is impracticable for a general meeting to be held to consider the proposed resolutions.  It would be appropriate in the exercise of my discretion to grant relief and award the costs of this application to the applicant.

13.  I make an order in terms of paragraphs 1 to 3 of the originating summons.  I will make an order for gross sum assessment.  I have considered the skeleton bill submitted by the applicant’s solicitors.  I will reduce the hours of the solicitors’ work from eight hours to five and cut down counsel’s fee to $40,000.  The amount of costs I award to the applicant for this application is $60,000.