RICH REGION HOLDINGS LTD (a company incorporated in the British Virgin Islands) v. CONCEPT PIONEER LTD (a company incorporated in the British Virgin Islands) AND OTHERS

HCMP 1370/2022 and HCMP 69/2023
(HEARD TOGETHER)

[2023] HKCFI 866

HCMP 1370/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1370 OF 2022

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 69 OF 2023

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(HEARD TOGETHER)

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REASONS FOR DECISION

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1.  I have two originating summonses before me purportedly issued by the Applicant, which is incorporated in the British Virgin Islands (“BVI”). I say purportedly because they have been issued on the Applicant’s behalf by receivers appointed on 9 March 2022 (“Receivers”) by the Industrial and Commercial Bank of China (Macau) Ltd. for defaulting on a loan facility secured by way of two share charges executed by the Applicant’s shareholders over their entire shareholding in the Applicant. The Applicant owns 83.5% of the 2^nd Respondent in HCMP 1370/2022 and 1^st Respondent in HCMP 69/2023 (“Company”), which are incorporated in Hong Kong. The other 16.5% is owned by Concept Pioneer Limited, which has also had receivers, different ones, appointed over its shares.

2.  The Company is part of a group whose ultimate beneficial owner is Pan Sutong a property developer who was declared bankrupt on 8 July 2022. The Company owns an interest in a valuable development. The evidence contains little details about the development, but it would appear from the affirmation of the 6^th Respondent in HCMP 1370/2022 that it is in Ho Man Tin.

3.  The Receivers wish to have themselves appointed as directors of the Company and obtain its records and accounts. To this end they have caused to be issued an originating summons under section 570 of the Companies Ordinance, Cap 622 (“Ordinance”), to convene an extraordinary general meeting (“EGM”) of the Company to reconstitute its Board of Directors and an originating summons under sections 620 and 740 of the Ordinance to obtain the Company’s books and records. Having heard counsel I dismissed the first originating summons and adjourned the second on the terms I explain later.

HCMP 1370/2022

4.  Section 570(1) provides:

“570. Power of Court to order meeting

(1) This section applies if for any reason it is impracticable—

(a) to call a general meeting of a company in any manner in which general meetings of that company may be called; or

(b) to conduct the meeting in the manner prescribed by the company’s articles or this Ordinance.”

5.  There is no issue that (a) does not apply. The Company has already convened two EGMs at the request of the Applicant to consider resolutions to reconstitute the Board. The Applicant argues that it is, however, impracticable to conduct an EGM in the manner prescribed by the Company’s articles or the Ordinance. They say this because at the last EGM held on 1 September 2022 the 6^th Respondent, who is a director of the Company and chaired the meeting, rejected the Receivers’ standing to represent the Applicant and vote its shares. He recognised the 3^rd Respondent’s standing to do so and the 3^rd Respondent voted against the resolution to reconstitute the Board. The 6^th Respondent’s reasons for doing so are recorded in the transcript of the EGM, namely, that there was an objection comprehensively explained in a letter to the Company from Oldham, Li & Nie dated 26 August 2022 sent purportedly on behalf of the Applicant disputing the enforceability of the share charge and the Receivers’ right to represent the Applicant. Subsequently, the Receivers have sought to address the objection by causing issue of a new certificate of incumbency that shows them as the directors. However, they anticipate that if a new EGM is convened and one of the current three directors (3^rd Respondent, 5^th Respondent and 6^th Respondent) are appointed as Chairman, as the articles of the Company provide, the result will be the same. The Applicant, therefore, seeks an order that one of the Receivers is appointed as the Chairman of the EGM they wish to convene.

6.  The problem with the approach taken by the Receivers can be explained simply. As I explain in [9] of Re Mandarin Capital Advisory Ltd[1] in cases in which it is suggested the matter falls within section 570(1)(b), the section is applicable if it is “not practicable ‘to conduct the meeting of the company in the manner prescribed by the articles….’. In practice this means convene a meeting that could consider and pass resolutions”. In the present case the problem the Applicant is trying to resolve is not a difficulty in convening a meeting at which resolutions can be passed. Section 570 is not engaged. The problem is a dispute concerning the Receivers’ standing to represent the Applicant. Section 570 is not the correct mechanism to use to resolve that type of dispute. The Applicant had a number of alternative and more appropriate procedural routes it could have used. It could have sought an order in the BVI confirming the Receivers’ status; or done so in Hong Kong, although this would have been less desirable. Alternatively, it could have requisitioned a meeting and sought an injunction to enjoin the Chairman from refusing to recognise the Receivers’ standing. This would have focused the evidence on the relevant issue. Mr Kwok suggested that these alternatives would have caused delay. I can see no reason why they would have been any slower than the route the Applicant has taken. On the contrary it may have been quicker and cheaper to make an application in the BVI where it is reasonable to assume the Court would be more familiar with both the substantive and procedural issues concerning a change of control of a BVI company. And if the substantive issue turned out to be a complicated question over the right to enforce the share charge this would only serve to demonstrate how inappropriate the use of section 570 is for the resolution of the real dispute.

7.  I, therefore, dismiss the originating summons and make a costs order nisi that the Applicant pay the 2^nd to 3^rd and 5^th to 7^th Respondents’ costs with a certificate for counsel such costs to be taxed if not agreed. The 5^th to 7^th Respondents had taken out summonses that the application against them be dismissed. They are academic given my decision in respect of the originating summons. I order that the summonses be withdrawn and the costs are paid by the Applicant with a certificate for counsel such costs to be taxed if not agreed.

HCMP 69/2023

8.  So far as the originating summons seeking documents is concerned it was agreed by the parties that it should be adjourned pending the ultimate determination of who is entitled to represent the Applicant and cast its votes. If the Receivers are successful presumably, they will be able to obtain the documents or, if they are face difficulties, it will be for reasons, which differ from the reasons which they believe have necessitated the currently formulated application. If they are unsuccessful the application will fall away. I will, therefore, simply adjourn sine die the originating summons, the summons of the 3^rd and 4^th Summons filed on 3 March 2023 and the summons of the 1^st Respondent filed on 17 March 2023 in HCMP 69/2023, direct general liberty to apply and reserve the costs.

In HCMP 1370/2022

In HCMP 69/2023