MA PO CHIM, PERCY AND OTHERS v. LEE TUNG HAI, LEO AND OTHERS

HCMP 3253/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3253 OF 2004

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D E C I S I O N

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1.  On 7 November 2005, certain members of the Chungshan Commercial Association, Hong Kong (“the Association” or “the 3^rd respondent”), compromised their disputes in HCMP No. 3253 of 2004 and in HCA No. 4714 of 2003.

2.  An order was made by consent in HCMP No. 3253 of 2004 (“the Order”).  The Order provided as follows:

(1)     An extraordinary general meeting and/or annual general meeting is to be held on 18 February 2006 at the office of the 3^rd respondent at 5:30 p.m. with the following agenda and not otherwise:

(i)	election and appointment of the 18th term directors of the 3rd respondent;
(ii)	approval of provision for legal expenses in these proceedings;
(iii)	confirmation and ratification of all actions taken by the board of directors of the 17th term as de facto board of directors of the 3rd respondent during the period between 1 January 2004 and 18 February 2006;
(iv)	considering and approving the financial statements of the 3rd respondent of 2003/2004 and 2004/2005 respectively; and
(v)	appointment of auditors of the 3rd respondent.

(2)     For the purpose of giving effect to and/or for the preparation of convening the above meeting, a Preparatory Working Committee shall be formed consisting of 12 individuals as named, they included 4 of the petitioners in these proceedings and the 2^nd respondent.  A convenor and a deputy convenor were appointed.

(3)     The Preparatory Working Committee shall within 2 months from the date of the Order:

(i)	verify the register of members of the 3rd respondent;
(ii)	prepare a list of candidates in accordance with the provisions of the Articles of Association for election of directors; and
(iii)	convene the extraordinary general meeting and/or annual general meeting  by giving notice of the same with accompanied voting tickets.

(4)     Save as aforesaid, no further order be made on the reliefs sought in the amended petition.

(5)     The question of costs be adjourned sine die.

(6)     There will be liberty to apply.

3.  On 7 February 2006, 3 members of the 3^rd respondent, Mo Loong Kwong, Lee Dai Chung and Yuen Cho Mo (collectively “the applicants”) issued a summons under Order 15 rule 6(2)(b) of the Rules of the High Court and the inherent jurisdiction of the court, seeking an order in these terms:

(1)     leave to add the applicants as parties to these proceedings by naming them as the 4^th, 5^th and 6 respondents respectively;

(2)     one of 2 named certified public accountant practices or any other independent party as the court shall think fit be appointed to replace the Preparatory Working Committee to carry out the functions of the Preparatory Working Committee in paragraph (3) of the Order; and

(3)     the extraordinary general meeting and/or annual general meeting of the 3^rd respondent fixed to be held on 18 February 2006 at 5:30 p.m. be adjourned or cancelled pending the determination of this application or until further order of the court.

4.  I consider I have jurisdiction to make the orders sought by the applicants under the “liberty to apply” provision in the Order.  I do not think the proceedings in HCMP No. 3253 of 2004 were concluded “for all intents and purposes” as contended by the solicitors for the petitioners so no order could be made by the court in any circumstances.  The purpose of the orders sought in the present summons is for carrying the Order into effect, not to overturn the settlement reached by the parties on 7 November 2005 and embodied in the Order.  As interested parties, the applicants have the locus standi to apply to be joined in the proceedings for the purpose of making an application on the implementation and enforcement of the Order.

5.  I have considered the complaints made against some of the members of the Preparatory Working Committee.  I shall not recite them.  The 1^st, 2^nd and 3^rd petitioners who are members of the Preparatory Working Committee and the other petitioners have made submissions by counsel that it is not necessary to appoint independent professionals.  Mr Alexander Wong, who appeared for them, informed the court that the petitioners do not oppose the present summons as such.  They are content to abide by any order that may be made on this application if the court thinks such order is in the best interests of the 3^rd respondent.

6.  The present application is not opposed by the 1^st and 2^nd respondents and 2 members of the Preparatory Working Committee, Li Tin Kuen, who is the 4^th petitioner herein, and Cheng Hon Shing. 

7.  I think it is in the best interest of the 3^rd respondent to appoint independent professionals to carry out the functions of the Preparatory Working Committee, for these reasons:

(1)     The members of the Preparatory Working Committee have not been able to contain their differences.  There were serious confrontations.  Some did not participate actively in the work of the Committee.  Both the convenor and the deputy convenor have resigned.  There is considerable mistrust between a faction of the Preparatory Working Committee and a large number of members in Section 2 of the Association (84 in number) who supported this application.

(2)     I have reservations if the work done by the Preparatory Working Committee for the verification of the register of members has been done properly and thoroughly.  So far, most of the complaints are from members in Section 2 (there are 9 sections in the Association).  I do not think their complaints can be disregarded, nor can it be assumed that there are no errors as regards the verification of members in other sections.  I have considered the evidence filed by the 1^st petitioner, Ma Po Chim Percy, regarding the discrepancies found by the applicants.  I do not think he has given an entirely satisfactory explanation.  In particular I do not see why the list of candidates should be prepared with reference to a list of candidates that was prepared for the election of the board of directors held in the year 2000, even if Mr Ma is correct in saying that no new member has been admitted since 2001.  I am not saying that he or any one working for the Committee must necessarily be blamed.  It could well be that records of members were kept in such an unsatisfactory state that any one charged with the job might encounter great difficulties.  That to my mind is a reason for appointing independent professionals to tackle the job on a full time basis, instead of relying on volunteer workers who carried out the job on a piece meal basis in their free time.

(3)     It has been raised by two members of the Preparatory Working Committee, the 2^nd respondent and Cheng Hon Shing, at the discussion in January 2006 that there was a discrepancy of about 600 members.  They suggested appointing independent third party professionals to verify the register of members in view of this large number of discrepancies.  It seems prudent to appoint independent professionals, as the work involved in this exercise may well be considerable.  This is a matter that should be resolved before the extraordinary general meeting/annual general meeting.  I do not think it right to brush aside the question of the voting rights of these members for the time being and leave it to those who claim to have suffered prejudice to bring the matter back to the court after the meeting was convened, as suggested by Mr Wong on behalf of the petitioners.

8.  I am mindful that the expenses involved in engaging independent professionals in carrying out the work may be quite substantial, but this is justified in the circumstances.  Furthermore, the Association is in a position to meet these expenses.

9.  I think it desirable that a timetable should be laid down for independent professionals to complete the work that they are charged to carry out.  This is to ensure that the election of a new board of directors is to take place without any undue delay.

10.  I make the following orders:

(1)     Leave is given to add the applicants as parties to these proceedings by naming them as the 4^th, 5^th and 6^th respondents respectively.

(2)     Horwath Corporate Advisory Services Limited be appointed to replace the Preparatory Working Committee to carry out the functions of the same in paragraph (3) of the Order dated 7 November 2005 and that the time for carrying out such work be extended to 30 April 2006.

(3)     The extraordinary general meeting/annual general meeting of the 3^rd respondent fixed to be held on 18 February 2006 at 5:30p.m. is to be adjourned to a date not later than 1 June 2006.

(4)     The costs of the applicants in this application are to be borne by the 3^rd respondent.  Save as aforesaid, there will be no order as to costs of the other parties in this application.