CLEVER OCEAN GROUP LTD v. AMYLINEAR INTERNATIONAL LTD

HCMP 3596/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3596 OF 2016

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HCMP 3597/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3597 OF 2016

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(HEARD TOGETHER)

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D E C I S I O N

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1.  I have before me two originating summonses dated 29 December 2016 seeking orders for convening extraordinary general meetings (“EGMs”) of the respondent companies (“Companies”) to reconstitute the boards of directors.

2.  The applicant is the same in both cases.  It is a British Virgin Islands (“BVI”) company.  According to a Certificate of Incumbency dated 1 December 2016, the applicant has one shareholder, Ms Liu Yi‑wen.

3.  Amylinear International Limited has two registered shareholders: the applicant who holds 4,990,000 shares and Lin Chih-hao who holds 10,000 shares.  Amylin Enterprises Limited also has the same two registered shareholders, although the proportion of the shares they hold are slightly different.  The applicant has 400,000 shares and Mr Lin 10,000 shares. 

4.  Mr Lin died intestate in Singapore on 24 January 2012. He was survived by his wife Liu Yi-wen, whom he had married in 2008, and their two sons Lin Pei-cheng aged 8 and Lin Ming-hung aged 7.  Letters of Administration have not yet been granted in Hong Kong, and thus says the applicant, the quorum requirement for convening an EGM of the two Companies cannot be met unless the directors of the Companies themselves convene the EGM: see articles 8(a) and 56.  The directors would not convene an EGM and thus, says the applicant, it is necessary for the court to make an order pursuant to section 570 of the Companies Ordinance, Cap 622.

5.  Taiwanese law has no provision for the grant of representation of a deceased’s persons assets.  Instead the property of the deceased is distributed in accordance with a statutory scheme.  In the present case the whole of Mr Lin’s estate passes to his wife and sons.  There is some inconsistency in the exhibits to Ms Liu’s evidence about the precise proportions, but it seems to me tolerably clear that Ms Liu takes 4/6 and her sons 1/6 each, but little if anything turns on this.  What is clear is that neither of the current directors of the Companies have a legal or beneficial interest in them or the applicant.

6.  On the face of the matter the application should be straightforward.  The principles on which the court acts are well established: see Re El Sombrero Limited [1958] 1 Ch 900, Wynn-Parry J at 904; Re Success Plan Limited [2002] 3 HKLRD 560, Yuen J at paras 42-44.  It must be demonstrated that it is impractical to convene a meeting.  It does not seem to me that this means that it must be demonstrated that it is currently and is likely always to remain impractical.  What is required is for the applicant to demonstrate that it is currently impractical, and that it is currently desirable that an EGM be convened. 

7.  In the present case the Companies suggest that it is not impractical because Ms Liu could proceed with her application for Letters of Administration in Hong Kong.  She has chosen to put the application on hold. I do not agree.  In my view the applicant has demonstrated that it is currently impracticable.  

8.  The Companies have raised other objections.  Although it is not in dispute that Ms Liu and her sons are entitled as a matter of Taiwanese law to Mr Lin’s estate, and that as a matter of BVI law the law of a deceased’s domicile determines who is entitled to it, the Companies question Ms Liu’s rights to have obtained probate in the BVI and caused her husband’s share in the applicant to be transferred into her name and for her to be appointed a director.  It does so for the following reasons.

9.  Mr Lin also had asset in Singapore.  As a matter of Singapore law, where an estate involves a minor, it is necessary for there to be two administrators.  Accordingly, Ms Liu and her father-in-law were appointed co-administrators in Singapore.  The father-in-law, Mr Lin Kiang‑ho, who is one of the directors that Ms Liu proposes to remove, said he should have been informed of the application in the BVI.  The Companies say it is a general rule that two administrators will be required in the BVI unless the court considers it expedient in all the circumstances to allow grant with one sole administrator, and it will not normally do so if there is a minority interest.  The Companies point out that this is borne out by an expert’s report filed by the applicant prepared by Mr Andrew Miller of Walkers.  He says this in para 9(x):

“The general rule is, therefore, that two administrators will ordinarily be required unless the court considers it expedient in all of the circumstances to allow the grant to be made to an individual to act as sole administrator. However, it will also be clear from the above that the court has complete discretion to appoint a sole administrator if it considers it to be expedient to do so. At paragraph 7.10 of the 28^th edition of Tristram and Coote’s Probate Practice (Butterworths) (attached at Appendix 2) the leading text on probate practice and procedure, the writers note:

‘7.10 ... No firm or exhaustive guidelines can be given of instances in which the discretionary power will be exercised, but it has been exercised, in the following types of case:

(a) where the proposed administrator is a solicitor or accountant; or

(b) where the proposed administrator is a surviving spouse and the amount of the estate only slightly exceeds the spouse’s statutory entitlement on intestacy; or

(c) where the minority interest relates to a minor who will shortly attain his majority; or

(d) where the proposed administrator is a representative of a local authority.’ ”

Mr Miller goes on to say that it is unclear on the papers he has been given whether the BVI court knew of the minority interest. 

10.  Ms Liu’s father-in-law has issued proceedings in the BVI to challenge the grant of probate.  The Companies submit that the application should be determined before any order is made to commence a meeting of the respondents.  The Companies also call into question, although for no evidence-based reason, whether Ms Liu had properly obtained authority to act on behalf of the applicant.  The complaints made are summarised in Ms Liu’s father-in-law’s Statement of Claim in the BVI proceedings, at paras 14-17:

“14. Based on the above, in breach of section 26 (1) of the Supreme Court (Non-Contentious) Probate Rules (the ‘NCPR’) there was no notice of the BVI Proceedings to the Lin’s Sons or to Steve Lin.

15. Further, in breach of section 26 (2) of the NCPR there was also no notice to Steve Lin who by virtue of having been appointed as a Co-Administrator in Singapore is and was at all relevant times a person equally entitled to the administration of the estate of Fred Lin under the Act.

16. At the time of the application to the BVI Court, there was plainly a minority interest arising under the estate in the form of the Lin’s Sons. There was therefore a requirement under BVI law to appoint no less than two individuals as administrators of the estate.

17. By virtue of the foregoing paragraphs above, Liu should not have been appointed as the sole executor of the estate of Fred Lin to the exclusion of Steve Lin who is equally entitled to administer the estate.  It is further averred that as a result of Liu’s deliberate concealment of or omission of mentioning the minority interest arising under the estate, this Court wrongfully appointed Liu as the sole administratrix in the BVI Grant.  Accordingly the BVI Grant should be revoked.”

11.  Paragraph 17 is plainly wrong as Ms Liu has demonstrated in evidence filed in these proceedings that evidence was in fact filed in the BVI application for a grant which made express reference to the minority interest.  The BVI court, therefore, knew when it made the grant and appointed the sole administrator of the minority interest in Mr Lin’s estate. 

12.  As I understand the main thrust of the Companies’ case, as explained by Mr Lok before me, it is currently unclear whether the grant is liable to be set aside by reason of the appointment of a sole administrator and whether in these circumstances Ms Liu had authority to direct the commencement of the current applications.  So far as the latter point is concerned he says that Mr Miller’s report does not address this issue and it cannot be dismissed as a bad one. 

13.  Mr Lok directed me to the decision of Mr Justice Andrew Cheung (as the Chief Judge, High Court then was) in Kammy Town Limited v Super Glory Corporation Limited [1]. In para 15 Cheung J says this:

“An objection of the present type can be dealt with summarily at the substantive hearing before the court seised of the application if, for instance, the objection is plainly bad on the affidavit evidence. Conversely, if on the affidavit evidence, it is plain beyond reasonable argument to the contrary that even taken to the highest, the affidavit evidence put in by those suing in the name of the company does not support the claim that the action has been authorised, then barring any question of ratification, the court would be quite entitled to summarily determine the objection in the defendant’s favour and strike out the name of the company from the action and thus bring an end to the litigation.”

This shows, Mr Lok says, that unless the court is of the view that the concerns about authority are plainly bad, the present application should be adjourned until after the BVI court determines the matter. 

14.  It seems to me clear from Mr Miller’s report, read in its totality and in particular para 8(m)(n) and para 9(m)(n), that Ms Liu was validly appointed as administrator of her late husband’s estate and was entitled to direct that she be appointed the applicant’s sole director and that the share in the company be transferred into her name.  I can see no reason on the face of the report to doubt this conclusion and that at present Ms Liu is authorised to commence the present application. 

15.  The only issue is whether the Companies have demonstrated any credible reason to think that a co-administrator will be appointed by the BVI court and that if it does this might lead to Ms Liu’s authority being interfered with.  I think not.  First, it seems to me that given Mr Lin’s limited BVI assets and Ms Liu and her sons’ right to the estate of her late husband, there is no reason to think that the BVI court’s initial willingness to appoint one administrator would be changed.  Secondly, it seems to me highly doubtful that if the BVI court did appoint a co-administrator it would be either Ms Liu’s father-in-law or her brother-in-law (the other director of the Companies).  The evidence before me clearly demonstrates that trust between Ms Liu and her father‑in-law and brother-in-law has broken down, and I would expect somebody independent to be appointed if a co-administrator is to be appointed at all.  I can see no sensible reason for thinking that they would think it desirable or prudent to take a different approach to the present matter to Ms Liu.

16.  I will therefore make orders for the convening of EGMs of the respondent companies.  I will hear counsel on the form of the orders and costs.