ADRIAN MICHAEL FAREBROTHER AND ANOTHER v. SIEGFRIED ADELBERT UNRUH AND OTHERS

HCMP 101/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 101 OF 2007

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REASONS FOR DECISION

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1.  At the end of the hearing on 29 May 2007, I dismissed the originating summons taken out by the plaintiffs in January 2007, indicating that the reasons for so deciding will be handed down later.  They are as follows.

2.  The originating summons sought the following relief:-

(a)	an order that an extraordinary general meeting of the 3rd defendant (“CIM Int’l”) be convened to consider and pass a resolution for the removal of the 1st defendant (“D1”) as a director of CIM Int’l;
(b)	an order that all other resolutions passed at the board meeting of CIM Int’l on 8 December 2006 be declared valid;
(c)	an order that the resolutions passed at the board meetings of CIM Int’l held on 29 December 2006 and 9 January 2007 be revoked.

3.  The resolutions passed on 8 December 2006 were (1) to withdraw D1’s signing authority on the bank accounts of CIM Int’l, and (2) to convene an extraordinary general meeting on 10 January 2007 to remove him as a director.

4.  The resolutions passed on 29 December 2006 were to rescind the resolutions passed on 8 December 2006.  Those passed on 9 January 2007 were to summarily terminate the services of the plaintiffs.

5.  The plaintiffs’ affirmations in support of the originating summons also allege D1’s misuse of the funds of CIM Int’l (which is denied by the defence).  By virtue of the arguments put forth by the defence on 29 May 2006 (summarized below), the allegation has practically no relevance to the determination of the originating summons.

6.  Reliance has been placed by the plaintiffs on s. 114B(1), Companies Ordinance (Cap. 32) which reads:-

“

If for any reason it is impracticable to call a meeting of a company in any manner in which meetings of that company may be called, or to conduct the meeting of the company in manner prescribed by the articles or this Ordinance, the court may, either of its own motion or on the application of any director of the company or of any member of the company who would be entitled to vote at the meeting, order a meeting of the company to be called, held and conducted in such manner as the court thinks fit … ” (emphasis supplied).

7.  The argument of the defence was, in short, even at the time of commencement of the originating summons, it was not impracticable for the plaintiffs to call a meeting of CIM Int’l.

8.  The first matter relied on by the defence was the undisputed fact that, before the commencement of the originating summons (in fact, since May 2006), the plaintiffs already became the majority shareholders, holding between themselves 55% of the shares of CIM Int’l.

9.  S. 113(1), Cap. 32 reads:-

“

The directors of a company, notwithstanding anything in its articles shall, on the requisition of members of the company holding at the date of the deposit of the requisition not less than one-twentieth of such of the paid-up capital of the company as at the date of the deposit carries the right of voting at general meetings of the company, … forthwith proceed duly to convene an extraordinary general meeting of the company”.

10.  Hence, the defence argued, the plaintiffs were more than capable of compelling a meeting of CIM Int’l to be convened without commencing the originating summons.

11.  As a matter of fact, the plaintiffs have already requisited the directors of CIM Int’l to convene an extraordinary general meeting on 8 June 2007.

12.  Further, subsequent to the deposit of such requisition, D1 and the 2^nd defendant (“D2”) (collectively “the personal defendants”) tendered their resignation from being directors.  The resignation was to take effect on 5 June 2007.  The personal defendants also notified the banker of CIM Int’l of their resignation.

13.  There is nothing in the evidence filed by the parties to show any valid reason why it was earlier impracticable for the plaintiffs to deposit the above requisition pursuant to s. 113(1), Cap. 32.  The plaintiffs were unable to put forth any such reason at the hearing either.

14.  By reason of the above matters, I agreed with the defence that the plaintiffs had failed to establish a claim which falls within s. 114B, Cap. 32.  It is trite law the court’s discretion jurisdiction thereunder only becomes exercisable when it can be shown that “it is impracticable to call a meeting of a company”: Lam Leung Yau v. HK-Asian Security Ltd And Others, HCMP 94/2004 (4 June 2004), para. 4; Finedon International Ltd. v. Profit Chart Industries Ltd. and Others [2002] 3 HKLRD 560, para 42; Gore-Browne on Companies, 45^th Ed. (April 2007), pp. 11-13 to 11-14.

15.  It follows from the above conclusion that the remainder of the relief sought by the originating summons also becomes unnecessary (whether at its commencement or at the hearing).  This is because being the majority shareholders, the plaintiffs have always been in a position to “unwind” whatever resolutions the personal defendants might have passed earlier and/or to pass whatever resolution the plaintiffs may wish to at a meeting convened pursuant to s. 113(1), Cap. 32.

16.  Similarly to para. 13 above, no sufficient reason has been shown regarding why the plaintiffs could not have undertaken such course before commencing the originating summons.

17.  Shortly before the hearing on 29 May 2007, the plaintiffs indicated to the defence that they would be seeking an adjournment of that hearing.  The application for adjournment was in fact made and was opposed by the defence.

18.  In view of the matters set out above, I agreed with the defence that no useful purpose could be served by granting the adjournment.  It was accordingly refused.

19.  In addition, by virtue of the above matters, I also agreed with the defence that the originating summons should be dismissed.

20.  The defence also argued that the originating summons otherwise had no merits.  It is strictly unnecessary to determine that aspect.  For completeness, I was inclined to agree with the defence regarding this as well.

21.  Despite the plaintiffs’ argument that the costs of the originating summons should be treated differently in respect of different parts of the prayers for relief, I agreed with the defence that no valid reason had been put forth to justify a departure from the usual rule that costs should follow the event.