WANG YANLONG AND ANOTHER v. NPCC (HONG KONG) LTD AND OTHERS

HCMP 2190/2018

[2020] HKCFI 2112

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2190 OF 2018

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D E C I S I O N

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1.  This is the hearing of an Originating Summons filed on 12 December 2018 (“OS”) by which the Applicants seek to impugn two Notices of Change of Company Secretary and Director of the 1^st Respondent (“Company”) filed with the Companies Registry on 13 and 22 March 2018 (“Notices”).

2.  By the first Notice, the Company Secretary of the Company was purportedly changed from the 2^nd Applicant to the 4^th Respondent on 12 March 2018.  By the second Notice, the 1^st Applicant was replaced as a director of the Company by the 2^nd and 3^rd Respondents. 

3.  The 5^th Respondent had rendered a Statement under s 43(2) of the Companies Ordinance, Cap 622 (“Ordinance”) to assist the court, and her attendance at this hearing was excused.

4.  The 2^nd to 4^th Respondents have failed to appear at this hearing.  There is a slight complication in that they still have on record solicitors acting for them (“Solicitors”).  However, the Solicitors no longer have instructions to do so and have taken out an application to cease to act for the 2^nd to 4^th Respondents. 

5.  Unfortunately, that application has not yet been heard.  There is no reason to delay this hearing to the prejudice of the Company and the Applicants, especially when the OS was filed in December 2018. There is no reason to believe that the 2^nd to 4^th Respondents are unaware of this hearing.  In the normal course of events, they would have been informed by the Solicitors of this hearing, and more likely than not were reminded of it by the Solicitors.

6.  Yesterday, this court received a letter from the 4^th Respondent concerning its resignation as Company Secretary of the Company from 10 August 2020.  The enclosures to the letter suggested that the 2^nd and 3^rd Respondents had resigned as directors of the Company on 10 August 2020.  However, the reliability of these documents is not clear.  The letter suggested that the 4^th Respondent does not resist these proceedings, although it does not agree with the allegations against it.  It stated that as a company secretarial services provider, it had acted with propriety.  Further, the 4^th Respondent indicated that it disagrees with any costs order against it. 

7.  These matters arose from a dispute between two camps which used to own a Mainland company, 北方石油化工(集團)有限公司 (“PRC Company”), which is the sole shareholder of the Company (the two camps are referred to as “Applicants’ Camp” and “Respondents’ Camp”).  For the present purpose, bearing in mind in particular that the 2^nd to 4^th Respondents have not appeared to defend the OS, the details of the dispute is not important because they had been resolved by proceedings in the Mainland.

8.  There were two set of Mainland proceedings.  One in which the shares in the PRC Company held by the Respondents’ Camp had been ordered to be returned to the Applicants’ Camp[1].  More importantly, in the other set of proceedings the purported bases of the Notices, namely, the shareholders’ resolutions and board resolutions of the PRC Company both dated 12 March 2018 (“Resolutions”) had been adjudged invalid and discharged by西安市雁塔区人民法院 (2018) 陕0113民初8138号on 23 December 2018, and upheld on appeal by陕西省西安市中級人民法院 (2019) 陕01民终6455号on 16 May 2019.  It is of interest to note that the appeal was discharged due to the non-appearance of the appellants (belonging to the Respondents’ Camp). 

9.  The issue of validity of the Resolutions must be a matter of Mainland law as they concerned the PRC Company.  On the evidence before the court[2], there is no reason to doubt that the Resolutions were invalid as adjudicated by the Mainland Courts. 

10.  In the evidence filed by the 2^nd to 4^th Respondents, there was a reliance on two subsequent resolutions of the Company both dated 29 March 2018: (a) a written board resolution signed by the 2^nd and 3^rd Respondents which purportedly sought to ratify the replacement of Company Secretary on 12 March 2018; and (b) a written shareholder’s resolution which purportedly sought to ratify the two Resolutions. 

11.  In respect of resolution (a), the legal effect of the resolution must depend on the validity of the appointment of 2^nd and 3^rd Respondents as the Company’s directors.  Unless resolution (b) is legally effective and came into existence before resolution (a), the latter cannot assist the case of the 2^nd to 4^th Respondents. 

12.  As regards the legal effect of resolution (b) it was based on a set of shareholders’ resolutions of the PRC Company dated 29 March 2018.  There is expert evidence on Mainland law adduced by the Applicants that the 29 March 2018 resolutions of the PRC Company were not valid.  The burden of proof on the 29 March 2018 resolutions must be on the 2^nd to 4^th Respondents.  In the absence of their attendance to prosecute their case, I am satisfied that the Applicants have made out their case on the invalidity of the Resolutions.

13.  There is an issue whether the Notices should be removed.  The applicable law had been summarised by Linda Chan J in Re China Crown Holdings Ltd [2020] HKCFI 1615 at §25 as follows :

(1)  Section 42(4) [of the Ordinance] prescribes and restricts how the Court’s power to order removal of information may be exercised.  Removal is to be ordered only if (i) the plaintiff has shown that registration of a document showing the rectification is not good enough; the continuing presence of the incorrect information will cause material damage to the company; and (ii) the company’s interest in removing the information outweighs the interest of other persons in the information continuing to appear on the register.

(2)  The fact that the information is incorrect, or relates to an invalid or ineffective transaction, or has been filed without proper authority of the company in question or that a document is a nullity or is one that should never have been registered, is not in itself a sufficient reason for removing it as opposed to rectifying it.

(3)  The order made by the Court is to be registered, so that the basis of the rectification (or removal) ought to be apparent from an inspection of the record.

14.  On behalf of the Applicants, Mr Suen SC asks for the removal of the Notices.  However, there is little evidence to demonstrate why appropriate rectification would not be adequate or why it is important to the Company to have the Notices removed.

15.  This court should bear in mind that appropriate annotations were noted on the Notices by the 5^th Respondent in respect of the dispute over the correctness of the information.  Such annotations have been in existence for nearly 2 ½ years.  There is no reason to believe that the registration of the Order to be made herein would not serve to vindicate the position of the Applicants and sufficiently demonstrate to all interested parties the basis of the rectification.  There is much to be said about maintaining a complete record of the Company.

16.  For these reasons, I shall grant the alternative relief of rectifications sought in the OS.  I shall hear Mr Suen on the terms of the order and costs.