TO CHUN WA AND ANOTHER v. GOLDSORT CO LTD AND OTHERS

HCMP 563/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 563 OF 2011

____________

____________

BETWEEN

____________

_________________________

REASONS FOR DECISION

_________________________

Introduction

1.  At the end of the hearing on 14 September 2011, I dismissed the plaintiffs’ originating summons.  Brief extemporary reasons were given for the decision at the time.

2.  On 15 September 2011, the plaintiffs requested for written reasons for decision or for the transcript of the said extemporary reasons for decision.  Instead of directing the release of the transcript, those reasons are set out below:-

“I disagree with the plaintiffs that [clause] 56, Table A [First Schedule, Companies Ordinance (Cap. 32)] is inconsistent with [clause 23], articles of association [of the 1^st defendant]. Instead, I consider the former provision to supplement the latter provision.

For this reason, the plaintiffs are unable to establish any grounds in support of the relief sought in the originating summons and it is accordingly dismissed”.

I will elaborate on the above in the paragraphs below.  Table A, Cap. 32 will be called “Table A” and the articles of association “the AOA” below.

Background

3.  The background giving rise to the above alleged inconsistency between Table A and the AOA can be summarized as follows.

4.  The 1^st defendant (“D1”) was incorporated in Hong Kong in about 1987.  D1’s 3 shareholders were the 1^st plaintiff (33% shareholding), the 2^nd plaintiff (1.75% shareholding) and the 2^nd defendant (65.25% shareholding) (“D2”).

5.  D1 adopts Table A but clause 1(1) of the AOA provides in effect that in case of conflict between the two, the AOA should prevail.

6.  On 25 November 2010, D2 issued a notice to convene an EGM on 15 December 2010 to consider (among other things) the appointment of the 3^rd and 4^th defendants as additional directors (the plaintiffs and D2 being the existing directors).

7.  The plaintiffs claim they were overseas on Wednesday 15 December 2010; they did not attend the said EGM.  It is their case the said EGM lacked the quorum required by clause 23, the AOA:-

“For all purposes the quorum for all general meetings shall not be less than two members personally present or by proxy and no business shall be transacted at any general meeting unless the requisite quorum be present at the commencement of the business” (emphasis supplied).

8.  D2 says the said EGM was adjourned to Wednesday 22 December 2010.  For such purpose, he relied, and still relies, on clause 56, Table A which provides:-

“If within half an hour from the time appointed for the meeting a quorum is not present, the meeting … shall stand adjourned to the same day in the next week, at the same time and place or to such other day and at such other time and place as the directors may determine, and if at the adjourned meeting as quorum is not present within half an hour from the time appointed for the meeting, the members present shall be a quorum” (emphasis supplied).

9.  D2 was the only member present at the EGM on 22 December 2010 and the 3^rd and 4^th defendants were appointed as directors.  Further, at a board meeting held later in December 2010 (without the plaintiffs’ attendance), part of D2’s shares were transferred to the 4^th defendant.  At an AGM held in February 2011, D2 and the 4^th defendant resolved that D2 and the 3^rd and 4^th defendants be appointed as directors (the plaintiffs were not re-appointed).

Decision

10.  The only argument put forth in support of the plaintiffs’ case is the inconsistency between clause 56, Table A and clause 23, the AOA.

11.  It is appropriate to examine the validity of their case by considering the relevant provisions of Table A itself.  Clause 55 thereof provides:-

“No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business and continues to be present until the conclusion of the meeting; save as herein otherwise provided, 2 members present in person or by proxy shall be a quorum” (emphasis supplied).

12.  It can immediately be seen that the language of clause 55 is very similar to that of clause 23.  The effect of the two is similar (if not the same in fact).  The draftsman of Table A could not have intended clause 55 to be a provision inconsistent with clause 56.  It is more probable he intended clause 56 to supplement clause 55.  The underlying rationale is obvious: clause 56 can avoid unwarranted and/or unnecessary “seizure” in a company’s affairs and management.

13.  In short, I find that there is nothing in the AOA to justify a conclusion that clause 23 should have a meaning or intention different to that of clause 55.