WEI WEN v. WEI XING AND ANOTHER

HCMP 2076/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2076 OF 2012

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BETWEEN

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J U D G M E N T

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1.  This was an application by the applicant for an order under section 114B of the Companies Ordinance to convene an extraordinary general meeting (“EGM”) of the company.

2.  The applicant and the 1^st respondent respectively hold 70% and 30% of the issued share capital of the company.

3.  To put the matter shortly, the shareholders are at loggerheads.  A meeting requires a quorum of two members.  Before explaining the deadlock situation, it should be mentioned that there are three directors of the company, being the applicant, the 1^st respondent, and the wife of the 1^st respondent, who is now the 3^rd respondent in this matter.

4.  The history can be stated shortly.  The applicant considered that his brother had been in breach of his fiduciary duties to the company in diverting business from the company to another entity that either he or his wife or both of them jointly set up and misappropriating assets of the company. Because the applicant needed to seek an ex parte injunction and an Anton Piller order, an action was commenced (which is HCA797/2012) in the name of the company but without first getting the requisite authority.

5.  In any event, the injunctions were obtained, and subsequently, the respondents sought to strike out HCA797/2012 for want of authority.  It was in those circumstances that the applicant considered that an application should be made to convene the EGM.  That forms the background to the application.

6.  The matter first came before me on 16 October 2012.  At the hearing, counsel for the 1^st respondent applied for leave to file an affirmation in opposition to the application.  It was said that the solicitors had only recently been instructed and there had not been time to prepare an affirmation to oppose the application.  In view of that request, the court directed that the 1^st respondent be given leave to file his affirmation by 24 October 2012 and the applicant had a right to file an affirmation in reply on 31 October 2012.

7.  The day after the hearing, the 1^st respondent waived an olive branch in the sense that he was prepared to consent to an EGM, but subject to various conditions.  Those conditions were that the agenda should include other matters that he wanted to raise and an order as to costs, but the sticking point was the issue of costs, because the suggestion was that there should be no order as to costs, and that was not acceptable to the applicant.

8.  Thereafter, the correspondence took on a life of its own.  Amazingly, within a space of two weeks, the solicitors were able to generate correspondence exceeding 100 pages.  Sometimes there were several letters a day.  Every conceivable point was argued many times before an agreement was reached.  Examples would be the time of the meeting, the date of the meeting, whether the company secretary should be in attendance, etc.  All that, frankly, was a waste of time.  The parties should and could have focused on the real issue if they had a real desire to hold this EGM.

9.  In any event, the EGM was held on 26 October 2012.  Thereafter, there was more correspondence dealing with the minutes of that meeting, and previously to that, the consent order that was to be submitted to the court.

10.  The reason why the application had been made in the first place was that it was impracticable to hold a meeting without the assistance of the court.  The 1^st respondent’s stance, and it is a stance that is repeated in his counsel’s submissions, is that no one would volunteer to agree to an EGM when there was something on the agenda that would be to his prejudice, and of course HCA797/2012 was much to the prejudice of the 1^st respondent since he is being sued for various breaches. It is quite clear that the 1^st respondent would not have attended the meeting or any meeting that might have been convened to ratify the bringing of that action and to authorise Leung & Associates to act for the company in those proceedings.

11.  The argument that the 1^st respondent put forward is that the applicant had to come to this court for assistance because it is quite natural that the other shareholder would not attend an EGM that is to his prejudice. That is fine and well, but as a matter of law, is that a valid reason for absolving him from the burden of costs as a result of the inability to have an EGM convened without the assistance of the court due to his stance?

12.  I am not aware of any case law that suggests that in these circumstances, the applicant should be deprived of his costs or that there should be no order as to costs.  On the substantive application it is quite clear that had the application gone ahead, this court would have made the order sought.

13.  On that basis, the applicant is clearly entitled to the costs for bringing this application, but the question remains whether he is entitled to all of the costs.  I have already expressed my strong views as to the unfortunate attitude of both sides when seeking to agree the EGM, the necessary consent order to be submitted to the court, and the minutes of the meeting thereafter.  I have taken the trouble to read that correspondence, and I come away with the firm impression that both sides are equally to blame.  It is not the fault of only one party.  It may be that on certain aspects one party adopted the right attitude but on another aspect he did not.

14.  So in those circumstances, I think a fair order would be that the applicant should have his costs up to and including 17 October 2012, and thereafter there should be no order as to costs save for the costs of today’s hearing.

[Court adjourns for the applicant to revise his statement of costs to reflect paragraph 14.]

15.  As for the gross sum assessment that I am asked to make, I am going to take a very broadbrush view.  Having regard to the matter involved and the factors I have mentioned, I think that really, parties should be aware that costs should not be disproportionate.  For a simple case like this, to run up costs of almost $160,000 is, I think, quite scandalous.

16.  I am going to make a gross sum assessment of $90,000.