DEFOND ELECTRICAL INDUSTRIES LTD v. REGISTRAR OF COMPANIES AND OTHERS

HCMP 1056/2024

[2025] HKCFI 4465

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1056 OF 2024

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J U D G M E N T

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A.   Introduction

1.  This is the substantive hearing of the Originating Summons (“OS”) and the Summons (“Summons”) both dated 20 June 2024 taken out by the Applicant (“DEIL”).  By the Order of DHCJ Jonathan Wong dated 1 August 2024, the OS and the Summons are to be heard together.

2.  By the OS, DEIL seeks:

(1)  a declaration that Mr Chu Man Hei Vincent (“Vincent”) was validly appointed as a director of DEIL on 16 June 2023;

(2)  a declaration that Mr Chu Wai Hang Raymond (“Raymond”, the 3^rd Respondent herein) was validly removed as a director of DEIL on 16 January 2024;

(3)  rectification of the Companies Register to reflect subparagraph(2) above;

(4)  an order that HSBC do update its bank mandate records.

3.  Raymond disputes and refuses to accept (a) the validity of Vincent’s appointment as DEIL’s director and (b) him being subsequently removed as a director of DEIL.

(1)  In June 2023, Raymond raised with HSBC (ie, the 2^nd Respondent herein), where DEIL maintains its main bank accounts (“the HSBC Accounts”), his objections regarding Vincent’s appointment.  As a result, HSBC stopped processing a request to change the signatory arrangements of the HSBC Accounts, suspended the credit facilities available to DEIL, and in May 2024 warned of an imminent freezing of the HSBC Accounts.

(2)  Raymond also raised his objections with the Registrar of Companies (ie the 1^st Respondent herein, the “CR”).  As a result, Raymond remains as a director on record on the Companies Register, and the ND2A (notice of change of director) filed on 16 January 2024 by DEIL is currently marked as “pending”.

4.  On 20 June 2024, DEIL issued the OS and commenced these proceedings.  At the same time, DEIL also issued the Summons seeking interim reliefs concerning the operation of the HSBC Accounts pending the resolution of the OS.  On 25 June 2024, in the hearing of the Summons, DHCJ Jonathan Wong granted interim reliefs to DEIL.

5.  In this hearing, DEIL is represented by Mr Jose Maurellet SC, leading Mr Vincent Lung and Mr Benjamin Lam.  Raymond is represented by Mr Anthony HK Chan SC, leading Mr Anson Wong Yu Yat and Mr Matthew Suen.

6.  Attendance of the CR in this hearing has previously been excused by the Court.  HSBC adopts a neutral position and does not appear in the hearing.

B.  Background

7.  Mr Wilson Chu (“Wilson”) is the younger brother of Raymond.  Their father founded Defond Group in 1978 and passed away in 1980.   The 2 brothers then inherited the businesses, ie the Defond Group.

8.  Vincent is Wilson’s son.

9.  DEIL was incorporated in Hong Kong on 17 November 1992 and it is a wholly owned subsidiary of 徳豐電創科技股份有限公司 (formerly known as 東莞晨達電器有限公司) (“Defond”, a company incorporated in Chinese Mainland).  In turn, Defond has 4 corporate shareholders:

(1)  C&C Components Limited (“C&C”), a Hong Kong company, owns 52.58% of Defond;

(2)  Smart Champ Enterprise Limited (“Smart Champ”), a Hong Kong company, owns 47.4% of Defond;

(3)  東莞市協昌實業投資有限公司 (“Xie Chang”), a company incorporated in Chinese Mainland and wholly owned by C&C, owns 0.01% of Defond; and

(4)  東莞市協峻實業投資有限公司 (“Xie Jun”), a company incorporated in Chinese Mainland and wholly owned by C&C, owns 0.01% of Defond.

For ease of reference, an agreed corporate chart of the Denford Group is annexed to this judgment.

10.  It is not in dispute that all these companies are (essentially) ultimately beneficially owned 50-50 by Wilson and Raymond.

11.  For Xie Chang and Xie Jun, Wilson is the registered legal representative (法定代表人).

12.  As to C&C and Smart Champ, by a board resolution of Defond passed in 2013, Defond has agreed to regard Wilson as the legal representative (法定代表人) of C&C and Smart Champ for matters related to Defond.  This was submitted to and approved by the Dongguan Bureau of Foreign Trade and Economic Cooperation and incorporated into the articles of association of Defond (“Defond  Articles”). 

13.  According to DEIL:

(1)  In respect of matters relating to Defond, all 4 corporate shareholders were and are under the control of Wilson.  This was because, in around 2011, Wilson and Raymond parted ways, split their business into 2 corporate groups and they each focused on their own group – Wilson continued to operate and manage the Defond Group, whilst Raymond operated and managed the Wise Ally Group (which was essentially a spin-off from the Defond Group).

(2)  Wilson used to sit on the board of Wise Ally until 2020, when he was asked by Raymond to resign before Wise Ally Group was listed.  He was never involved in the day-to-day operations and management of Wise Ally Group.  Wise Ally Group was and still is run by Raymond.

(3)  Likewise, although Raymond used to be on the board of Defond Group (DEIL being one of its main subsidiaries), he was never involved in the day-to-day operations or management of the Defond Group (including DEIL).  Defond Group was and still is run by Wilson (now together with Vincent).

14.  According to Raymond, there is a longstanding agreement and mutual understanding between him and Wilson that, as equal owners of the Defond Group, each of them would be the only key person and would have equal right of participation in the management of the Defond Group (“the Mutual Understanding”).  By attempting to appoint Vincent to join the board of DEIL (“the DEIL Board”) and to remove Raymond from the DEIL Board, Wilson has acted contrary to the Mutual Understanding.

15.  The material events in this case are as follows:

(1)  On 16 June 2023, the board of Defond (“the Defond Board”) passed a resolution[1] (“the 16.6.2023 Defond Board Resolution”) as set out in 德丰电创科技股份有限公司关于召开第二届董事会第五次会议的通知dated 13 June 2023 (“the 13.6.2023 Defond Board Notice”). That resolution resolved that Vincent would be a director of DEIL.

(2)  On the same date, on the basis of the 16.6.2023 Defond Board Resolution, Defond as the sole member of DEIL signed a written resolution to appoint Vincent as a director of DEIL (“the 16.6.2023 DEIL Member Resolution”).

(3)  On 11 December 2023, the Defond Board passed a resolution[2] (“the 11.12.2023 Defond Board Resolution”) as set out in 德丰电创科技股份有限公司关于召开第二届董事会第九次会议议案 dated 8 December 2023 (“the 8.12.2023 Defond Board Notice”).  That resolution resolved that Raymond would be removed as a director of DEIL.

(4)  On 28 December 2023, the DEIL Board resolved (“the 28.12.2023 DEIL Board Resolution”) that a general meeting of DEIL be convened on 16 January 2024 to consider to pass a resolution to remove Raymond from the DEIL Board.

(5)  On 16 January 2024, in the general meeting of DEIL, it was resolved that Raymond be removed from DEIL Board (“the 16.1.2024 DEIL Member Resolution”).

16.  Both parties have adduced expert evidence on Mainland law in support of their respective positions.  Raymond relies upon the written legal opinion of 王正 (“Mr Wang”) dated 15 November 2024, and DEIL relies upon the written legal opinion of 黄福龙 (“Mr Huang”) dated 13 March 2025.  Both Mr Wang and Mr Huang are practicing lawyers in Chinese Mainland.  I accept that they are qualified to give evidence on Mainland law.

C.  The parties’ respective cases

C1.  DEILs’ case

17.  Mr Jose Maurellet SC on behalf of DEIL submits that both the appointment of Vincent to the DEIL Board (“the Appointment”), and the removal of Raymond from the DEIL Board (“the Removal”), are valid as a matter of company law and procedure.  Thus, DEIL seeks the reliefs as set out in the OS.

C2.  Raymond’s case

18.  Raymond has filed an affirmation made by him on 18 November 2024 in opposition to the OS and to the Summons (“Raymond’s Affirmation”).

19.  Mr Anthony HK Chan SC on behalf of Raymond submits that both the Appointment and the Removal are invalid.

20.  Mr Chan SC submits that both the Appointment and the Removal are contrary to the Mutual Understanding between Wilson and Raymond.

21.  Further, as to the validity of the Appointment, Mr Chan SC submits that:

(1)  The 13.6.2023 Defond Board Notice is invalid.

(a)  Defond Articles, article 113 provides:

“董事会每年至少召开两次会议，由董事长召集，于会议召开10日前书面通知全体董事和监事。”

(b)  The 16.6.2023 Defond Board Notice is clearly in breach of article 113 in three material respects:

(i)  The notice was issued 3 days (instead of the requisite 10 days) before the board meeting.

(ii)  According to the notice, the meeting was convened in the name of Defond, and not its Chairman (ie Wilson).

(iii)  The notice was not addressed to the 3 supervisors (监事)[3] of Defond. 

(2)  Further, the power to appoint or to remove DEIL directors lies with the shareholders of Defond, not the Defond Board.

22.  As to the Removal, in Raymond’s Affirmation, save and except the challenge that the Removal is contrary to the Mutual Understanding, there is no challenge to the validity of the Removal in Raymond’s Affirmation.  However, Mr Chan SC submits that the arguments in support of the invalidity of the Appointment apply mutatis mutandis to explain why the Removal is also invalid.

23.  Raymond seeks an order to dismiss the OS.  Further, Raymond counterclaims for (a) an order removing the ND2A in relation to the appointment of Vincent as a director of DEIL from the Companies Register, and (b) declarations that both the Appointment and Removal are void and of no legal effect.

D.  Discussion

24.  In my view, in considering the validity of the Appointment and the validity of the Removal, I have to consider the plain and natural meaning of the Defond Articles, and I have to apply common and commercial sense at the same time.

D1.  Mutual Understanding

D1.1  Mutual Understanding not relevant for the purpose of this case

25.  As submitted by Mr Jose Maurellet SC for DEIL, this is not a case for unfair prejudice or a just and equitable winding up.  If Raymond considers himself entitled to take part in the management of DEIL and the Defond Group as a whole because of the Mutual Understanding put forward by him in his case, Raymond may commence proceedings based upon unfair prejudice.  Raymond’s position that he should remain in management of DEIL and the Defond Group is per se irrelevant to the question whether the Appointment and/or the Removal is valid as a matter of company law and procedure.

26.  In my judgment, the alleged Mutual Understanding is not relevant for the purpose of this case.

D2.  Validity of the Appointment

D2.1  Validity of the 13.6.2023 Defond Board Notice

27.  There is no merits in the 3 grounds (see §21(1)(b) above) put forward by Raymond challenging the validity of the 13.6.2023 Defond Board Notice.

28.  As to Ground 1:

(1)  Mr Chan SC has fairly drawn my attention article 115 of the Defend Articles, which provides:

“若出现特殊情况，需要董事会即刻作出决议的，为公司利益之目的，董事长或其他召集人召开临时董事会会议可以不受前款通知方式及通知时限的限制。但董事长或其他召集人应当在会议上作出说明。” (Emphasis added)

(2)  Hence, the 10-day notice period requirement in article 113 is not an absolute requirement.  In a special situation, in which the board would need to make a decision immediately to safeguard the company’s interest, the chairman of the board or the convenor of the board meeting may convene an ad hoc board meeting (临时董事会会议) without being limited by the notice period requirement in article 113.  However, the chairman of the board or the convenor of the board meeting shall make a statement (作出说明) in the meeting.

(3)  Mr Chan SC submits that as shown in the minutes of the Defond Board Meeting held on 16 June 2023, Wilson (as the chairman of the board) did not make the necessary statement under article 115.  Hence, article 115 would not be applicable.  That being the case, the fact that the 13.6.2023 Defond Board Notice contravening the 10-day notice period requirement in article 113 would invalidate the notice issued on 13 June 2023 and board meeting held on 16 June 2023.

(4)  With respect, I am unable to agree with Mr Chan SC.  The minutes of the Denfond Board Meeting held on 16 June 2023 is not a verbatim record of the meeting.  Only the gist of the meeting is recorded in the minutes.  Thus, the fact that some words were not stated in the minutes does not necessarily mean that those words were not said in the meeting.

(5)  It is worth to note that in the minutes, it is stated:

“主持人宣布本次临时董事会议一致通过《关于德丰电创科技股份有限公司全资子公司德丰电业有限公司增加董事的议案》，朱文希先生将担任德丰电创科技股份有限公司全资子公司德丰电业有限公司董事。” (Emphasis added)

(6)  The meeting was chaired by Wilson.  As recorded in the minutes, Wilson did say in the meeting that the meeting on 16 June 2023 was an ad hoc board meeting (临时董事会议).  Naturally, when telling the other directors that the meeting was an ad hoc board meeting, the chairman would also tell the other directors why it would be necessary to have that ad hoc board meeting.

(7)  In my view, what has been stated in subparagraph (5) above is prima facie evidence showing that Wilson has fulfilled the requirements under article 115, and hence the 10-day notice period requirement under article 113 would not be relevant.

(8)  This aforesaid conclusion is supported by the fact that no director of Defond (including the 2 directors who did not attend the board meeting on 16 June 2023) has ever lodged any complaint saying that there was no sufficient notice period for the board meeting on 16 June 2023.  Applying common and commercial sense, that could only mean that all directors considered that the board meeting on 16 June 2023 was convened under article 115, and hence the question of insufficient notice period did not arise.

(9)  Further, Raymond has not adduced any evidence on Mainland law showing how he could lodge a challenge to the 13.6.2023 Defond Board Notice and/or the 16.6.2023 Defond Board Meeting, while he was not a director of Defond at the material times, and while all the directors of Defond has never regarded that notice and/or the meeting having any problem.

29.  As to Ground 2, in my view, the plain meaning of  “由董事长召集” is that the notice convening the board meeting should be issued by the order of the chairman of the board, not that the notice must be issued in the name of the chairman.  Wilson, as the chairman of the board, attended the board meeting on 16 June 2023.  If that meeting was not convened by his order, naturally he would raise objection in the meeting. However, as shown in the minutes, Wilson chaired the meeting, and the 16.6.2023 Defond Board Resolution was passed in the meeting.  Any suggestion that the meeting was not convened by Wilson’s order is contrary to common sense and must be rejected.

30.  As to Ground 3:

(1)  Article 168 of the Defond Articles provides:

“因意外遗漏未向某有权得到通知的人送出会议通知或者该等人没有收到会议通知，只要出席会议的人数以及表决情况合法有效，会议及会议作出的决议并不因此无效。”

(2)  In the hearing, I drew the parties’ attention to article 168.  I expressed a provisional view that article 168 is an answer to Ground 3 put forward by Raymond to challenge the validity of the 13.6.2023 Defond Board Notice.  Mr Chan SC did not submit otherwise.  My provisional view now becomes my final view.

31.  In my judgment, Raymond has put forward no sufficient reason to impugn the validity of the 13.6.2023 Defond Board Notice and/or the 16.6.2023 Defond Board Meeting.

D2.2  Powers of the Defond Board

32.  Raymond argues that the Defond Board does not have any power to appoint or to remove DEIL directors.  Such power can only be exercised by the Defond shareholders.

33.  As submitted by Mr Chan SC, there is no serious disagreement between Mr Huang and Mr Wang that:

(1)  As a matter of Mainland law, the powers of the directors of a company are defined by reference to (a) the law, (b) the articles of association and (c) the authorisation by the shareholders.

(2)  The 2018 version of the Company Law (公司法) is the applicable version in the present case, and it did not expressly settle (“未規定”) the issue whether the power to appoint or remove directors of a subsidiary belongs to the shareholders or the directors of the parent.

(3)  That issue is not a matter expressly settled (“未規定”) in Defond Articles.

34.  In my view, as to whether the Defond Board has the power to appoint or to remove a director of DEIL (being a subsidiary of Defond), the answer lies in article 102(1) and article 194 of Defond Articles.  I note that these two articles have not been discussed by Mr Huang or Mr Wang.  However, that does not mean that I could not consider these articles.

35.  In Shenzhen Development Bank Co Ltd v New Century Int’l (Holdings) Ltd and Another[4], DHCJ Lam (Lam PJ as he then was) said:

“25. …… Issues of foreign law are regarded as issues of facts in our courts. But they are facts of a peculiar kind. In the resolution of conflicts in the expert evidence on foreign law, a judge is entitled and indeed obliged to use his legal training insofar as it may have a bearing on the resolution of dispute. The proper approach has been held by the English Court of Appeal in MCC Proceeds Inc. v Bishopsgate Investment Trust [1999] CLC 417 at p. 421 [13] to be as follow,

‘In our judgment, the answer varies according to the nature of the issue which arises in the particular case and the kind of decision which the trial judge and now the Court of Appeal is called upon to make. Sometimes the foreign law, apart from being in a foreign language, may involve principles and concepts which are unfamiliar to an English lawyer. The English lawyer. The English judge’s training and experience in English law, therefore, can only make a limited contribution to his decision on the issue of foreign law. But the foreign law may be written in the English language; and its concepts may not be so different from English law. Then the English judge’s knowledge of the common law and of the rules of statutory construction cannot be left out of account. He is entitled and indeed bound to bring that part of his qualifications to bear on the issue which he has to decide, notwithstanding that it is an issue of foreign law. There is a legal input from him, in addition to the judicial task of assessing the weight of the evidence given.’

And further at p. 423 [19],

‘[The judge] is entitled, indeed bound, to contribute his own legal skill and experience in reaching his conclusion, so much so that he may, in a suitable case, form his own view of the meaning of a statute which the expert witness tells him is the governing foreign law, even if the expert’s opinion as to its meaning is different from his own …’

And on the same page, [20],

‘…whether the judge is only entitled to reject the expert’s opinion evidence as to the meaning of the statute when the witness has put forward an ‘impossible view’ … in our judgment, the trial judge’s powers are not so limited … in a case where the English court interprets the statute in accordance with English rules of construction, there being no evidence that different rules would govern the foreign court’s interpretation, and where there is no suggestion that any of the words of the statute has a special meaning, different from its ordinary meaning, in the foreign context.’

......

27. …… In the present context, as a bilingual judge, I regard myself as duty bound to use my knowledge in the Chinese language and legal training, insofar as permissible in accordance with the principles set out in Bishopsgate Investment to examine the relevant legislations, directives and other authorities referred to by the experts. ……” (Emphasis added)

36.  Article 102(10) provides:

“董事会行使下列职权：

……

(十)  聘任或者解聘公司总经理、董事会秘书；根据总经理的提名，聘任或者解聘公司副总经理、财务总监等高级管理人员，并决定其报酬事项和奖惩事项；”

37.  It is plain that the power to appoint and to remove the总经理(“CEO”) of Defond is vested in the Defond Board.  No doubt, the CEO of Defond would be the most senior officer immediately below the Defond Board.  While Defond Articles confer the power to appoint and to remove the CEO on the Defond Board, applying common and commercial sense, the most natural conclusion is that the Defond Board would also have the power to appoint or to remove a director of a subsidiary of Defond.  I do not see any reason in support of a contrary conclusion.

38.  Article 194 provides:

“本章程由公司董事会负责解释。”

39.  It is plain that the power to interpret the Defond Articles is vested in the Defond Board.  When the Defond Board passed the 16.6.2023 Defond Board Resolution, no doubt the board would be considering that they were doing something lawful and permissible under the Defond Articles.  Bearing in mind that the power to interpret the Defond Articles is vested in the Defond Board, and bearing in mind that there is no law (see §33(2) above) preventing the Defond Board from taking that view (ie it would be lawful and permissible under the Defond Articles for the Defond Board to pass a resolution to appoint a director of a subsidiary of Defond), there is no ground to say that the 16.6.2023 Defond Board Resolution is something impermissible under the Defond Articles.

40.  In my view, the Defond Board has the power to pass the 16.6.2023 Defond Board Resolution.

D2.3  Appointment valid

41.  For the reasons above, the 16.6.2023 Defond Board Resolution is valid.

42.  Article 24 of DEIL’s Articles provides:

“A resolution in writing signed by all the shareholders shall be as valid and effectual as a resolution passed at a general meeting duly convened and held”

43.  Since the 16.6.2023 Defond Board Resolution is valid, the 16.6.2023 DEIL Member Resolution is duly signed by Defond, the sole shareholder of DEIL. Being a company incorporated in Hong Kong, DEIL is bound by its own articles. Thus, DEIL must be bound by the 16.6.2023 DEIL Member Resolution.

44.  The above would be sufficient for disposing of the issue of the validity of the Appointment.  In my judgment, the Appointment is valid.

45.  The parties have also put forward arguments concerning the following scenario, ie if the 16.6.2023 Defond Board Resolution is invalid, whether the Appointment can still be regarded as valid by the application of the irregularity principle, given the fact that in the 4 corporate shareholders of Defond, Wilson is the legal representative of each corporate shareholder. Given my conclusion as stated in the above, it would not be necessary for me to go into those arguments.

D3.  Validity of the Removal

46.  The analysis concerning the Appointment as stated in the above would apply to the Removal, mutatis mutandis.[5] In my judgment, the Removal is also valid.

D4.  Reliefs

47.  It follows from the above that DEIL’s claim as per the OS must be allowed, and Raymond’s counterclaim must be dismissed.

D5.  Costs

48.  Subject to the matter below, there is no disagreement between the parties that costs should follow the event, with a certificate for two counsel.

49.  As mentioned in §4 above, there was a hearing of the Summons before DHCJ Jonathan Wong on 25 June 2024.  Costs of that hearing were reserved.

50.  Mr Anson Wong Yu Yat for Raymond submits that in the event that DEIL succeeds in these proceedings, costs of the hearing on 25 June 2024 should not be awarded to DEIL, or part of the costs of that hearing should not be awarded to DEIL.  The reason in support of this submission is that one day before the hearing, ie on 24 June 2024, DEIL amended their proposed order. DEIL had changed its position at a very late stage before the hearing on 25 June 2024.

51.  I asked Mr Wong, and Mr Wong fairly told me that notwithstanding the fact the DEIL had adjusted its position one day before the hearing on 25 June 2025, the new position adopted by DEIL was still opposed by Raymond in the hearing on 25 June 2025, and the matter was argued in that hearing.  After hearing submissions, DHCJ Jonathan Wong granted interim reliefs to DEIL.  In these circumstances, I do not see why DEIL’s adjustment of its position on 24 June 2025 should have any bearing on the parties’ respective positions on costs.  After all, there were full arguments on DEIL’s adjusted position in the hearing on 25 June 2025.  That hearing concerns interim reliefs.  Now DEIL is the ultimate successful party in these proceedings.  In my view, costs reserved under the Order dated 25 June 2025 should also be awarded to DEIL.  

52.  While the CR and HSBC have not appeared in the hearing before me, they may have incurred some costs in these proceedings.  I would make an order on nisi basis that costs incurred by CR and HSBC be paid by Raymond, to be taxed if not agreed.

E.  Disposition

53.  I allow DEIL’s claim and dismiss Raymond’s counterclaim.  There be an order in terms of §§1 to 4 of the OS.

54.  As between DEIL and Raymond, costs of these proceedings, including costs reserved, be paid by Raymond to DEIL, to be taxed if not agreed, with a certificate for two counsel.

55.  On nisi basis, costs of the CR and costs of the HSBC in these proceedings be paid by Raymond, to be taxed if not agreed.  Unless an application for variation of the costs order nisi is made by a summons within 14 days after the handing down of this judgment, the costs order nisi shall become absolute without a further order.

56.  Finally, it remains for me to thank all counsel for the helpful assistance rendered to the Court.

Annex