SUN JIANGRONG v. SUN SHAOHUA AND ANOTHER

HCMP1526/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1526 OF 2010

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J U D G M E N T

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1.  On 12 August 2010 the Joint and Several Receivers of 70% of the shares in the 2nd Respondent (“the company”) held in the name of the Applicant, Sun Jiangrong, issued an originating summons seeking an order under section 114(b) of the Companies Ordinance for an extraordinary general meeting of the Company to be convened within three days of the order being made.

2.  Initially the 1st Respondent contested the application.  A trial was fixed for 21 to 23 December 2010.  On 20 December a consent summons was filed for an order by consent in the following terms:

(i)    Judgment be entered in favour of the Applicant in terms of paragraphs 1 and 3 of the originating summons herein issued on 12 August 2010.

(ii)  Costs of the proceedings herein, including the costs of this summons and any costs reserved, be paid by the 1st Respondent to Messrs Roderick John Sutton and John Howard Batchelor in their capacity as the interim joint and several receivers and managers over the Applicant’s shares.

(iii) There be no order as to costs between the 1st and 2nd Respondents

(iv)  The dates fixed for the trial herein, that is, 21 to 23 December 2010 -    be vacated.

3.  It was signed by solicitors for the Applicant and the 1st Respondent.  It was also signed by L H Kwan & Co on behalf of the 2nd Respondent, although they did not file a notice to act until 21 December 2010.

4.  An order was made by Recorder A Chow, SC, on 20 December 2010 in the same terms as the consent summons.  It seems to me clear that the wording of the order required a meeting to be held within three days of the order.  The purpose of the meeting was to reconstitute the board of directors of the company.  Hogan Lovells, solicitors for the Applicant, sent on 23 December 2010 a letter to the Respondents’ solicitors giving notice that the meeting was to be held at 4 pm on 23 December 2010 at the Hong Kong Club Building.

5.  Subsequently a concern apparently arose concerning whether the notice was sufficient.  Faith Lin, a solicitor with Hogan Lovells, telephoned at approximately 2.30 pm on 23 December the solicitors for the respective Respondents and informed them that the meeting would take place at 10.30 am on 24 December, and she says that there was no objection raised.  The change in time was confirmed by letter.

6.  The meeting took place and, unsurprisingly, the 1st Respondent did not attend.  It was subsequently realised by Hogan Lovells that the meeting had taken place one day later than required by the order, and the Applicant has issued a summons to extend the time period for convening the meeting.  There is no dispute that the order was not complied with and that this was the Applicant’s fault.  There is a dispute about what precisely was said during the conversations between Miss Lin and representatives of the Respondents’ lawyers on 23 December.  I cannot determine whose recollection is correct on affirmation evidence.  I would, however, note that neither of the people who Miss Lin talked to were solicitors, and it would seem more likely than not that they simply acknowledged what they were told, rather than said something that could fairly be construed as agreeing to a change to the provisions of the order sufficient to estop the Respondents from contesting this application.

7.  I therefore proceed to deal with the application on the basis that the Respondents did not agree to extend time convening the meeting.  It seems to me that three mistakes have been made by the Applicant.  The first is the failure to comply with the order.  The second is the specification of an impractically short time period for convening the meeting.  No explanation for only allowing three days has been provided.  Third is the failure to include the normal provision that there be liberty to apply, which the Respondents accept would have enabled the present application to extend time to be made.

8.  The Respondents argue that the court should not extend time for two reasons.  Both are technical.  It is not suggested that the Respondents are being prejudiced by the failure to comply with the order.  The Respondents’ position is not attractive, but it does not follow that their objections are misconceived.

9.  Mr Chain, who appeared for the 1st Respondent, argued that the consent order constituted a contract between the parties and it should not be altered by the court.  The alternative argument is that the signing of the consent summons by the Respondents merely indicated withdrawal of the Respondents’ objection to the orders.  The leading authority is Leung Yee and Another v Ng Yiu Ming and Another [2001] 1 HKLRD 309. After review of the authorities, the Court of Appeal summarised the principles as follows:

1.  A consent order may evidence a contract.

2.  On the other hand, a consent order may only mean parties to it are not objecting to the order being made and the court can alter its terms.

3.  Where there is a true contract contained in a consent order, the court has no power to set it aside or vary its terms.

4.  However, where the consent order founded on a true contract is not sought to be set aside or altered, unless it is plain that time was intended to be of the essence or that the jurisdiction of the court under R8(c) Order 3 Rule 5 to extend time is ousted by agreement, the court can grant an extension of time.

10.  In the present case, the consent summons records the Respondents agreeing to the terms of the originating summons.  It does not represent a compromise of a claim.  It is a complete capitulation.

11.  In my view, the consent summons does not represent a true contract between the parties, but records the withdrawal of the Respondents’ objections to the order sought.  Of itself, the consent summons does not provide a bar to the court granting the extension of time the Applicant seeks.

12.  The second objection is that the court is functus officio and has no power to extend time.  The order was made by Recorder A Chow, SC, on 20 December 2010 and sealed on 3 January 2011.  The order was the final judgment in this action.  Other than for the taxation of the Applicant’s costs, nothing remained to be done in the proceedings.  The Applicant had not, as it could have done, reserved the right to return to court for additional directions in connection with the convening of the extraordinary general meeting.  Mr Douglas Lam, who appeared for the Applicant, submitted that the perfecting of the order did not oust the power of the court to extend time under Order 3 Rule 5, and that the functus officio objection is a red herring.

13.  Order 3 Rule 5 provides:

“The court may, on such terms as it thinks just, by order extend or abridge the period within which a person is required or authorised by the rules or by any judgment, order or direction to do any act in any proceedings.”

14.  On its face it expressly refers to judgments, and I can see no reason not to read it as including final judgments.  Mr Chain did not argue otherwise.  Mr Chain’s answer to my question as to why Order 3 Rule 5 did not apply to the present order for judgment was that it only applied to orders which expressly or impliedly include liberty to apply, and in other cases the court is functus officio and has no jurisdiction to extend time for an act specified in the judgment to be done.

15.  I do not think that this can be correct, as any application under such a judgment would be made pursuant to the right to apply, and Order 3 Rule 5 would be otiose.  I can see no reason not to give Order 3 Rule 5 its natural interpretation, namely that the court may extend a time period included in a judgment or final order such as the present one.  The only authority which has been cited to me which is directly on point is that of Pumfrey J in Omega Engineering Inc v Omega SA [2003] EWHC 1482 (Chancery) in which the court took the same view.

16.  I will therefore make an order in the terms of paragraph 1 of the summons issued on 27 October 2011 and hear the parties on costs.

(Submissions on costs)

17.  So far as costs are concerned, I will make an order that the Respondents pay 75% of the Applicant’s costs, such costs to be taxed and paid forthwith.

(Submissions on leave to appeal)

18.  Insofar as you need leave and this is an application for leave, I am not granting leave.