NORTHERN LIGHT GROUP S.A. v. JENS-ARNE HANSEN

HCMP 430/2024

[2024] HKCFI 1980

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 430 OF 2024

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BETWEEN

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DECISION

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1.  This is the application of Northern Light Group SA (“P”) by Concurrent Originating Summons dated 26 April 2024 (the “OS”) for an order pursuant to section 570 of the Companies Ordinance, Cap 622 (“New CO”) allowing a general meeting of Northern Oriental Shipping Ltd (the “Company”) to proceed with a quorum of one member, rather than two members as required by Article 23 of the Company’s Articles of Association (the “Articles”).

Relevant background

2.  The background facts may be summarised as follows:

(a) the Company (formerly Peace Shipping Ltd) was incorporated in Hong Kong on 7 June 2007 under the Companies Ordinance (Cap. 32) (the “Old CO”);

(b) Article 1 of the Articles provided that they are to be read together with the regulations in the 1^st Schedule CO (“Table A”) and in the event of conflict, the Articles are to prevail;

(c) the 2008 Annual Return shows that P acquired the only issued share in the Company on 11 May 2007 and, subsequently, on 18 September 2007, 9999 further ordinary shares were paid up and allotted to P who became the sole holder of 10,000 ordinary shares in the Company;

(d) the notification of First Secretary and Director also dated 18 September 2007 shows Lennart Emil Heijne (“LEH”) and Jens-Arne Hansen (“D”) as directors of the Company;

(e) in November 2009, P transferred 5000 ordinary shares in the Company to D, with each of P and D holding 50% of the issued shares;

(f) on 23 July 2013, P invested US $500,000 into the Company, which accordingly allotted 3.9 million shares of HK $1 each to P, resulting in P holding 3,905,000 ordinary shares and D holding the balance of 5000 ordinary shares, this fact being recorded in the 2004 Annual Return of the Company filed on 16 July 2014 being the latest Annual Return of the Company; and

(g) after LEH relocated to Sweden in late 2014, day-to-day management of the Company was entrusted to D.

3.  It transpires that D has mismanaged the Company in that:

(a) after the company secretary resigned on 1 April 2015, no replacement has been appointed;

(b) as the company secretary had provided the Company with the registered office, upon its resignation, the Company ceased to have a functioning registered office;

(c) no filings have been made at the Companies Registry since the 2014 Annual Return;

(d) after notifying the Company of multiple breaches of the Companies Ordinance (Cap. 622) (the “CO”) in December 2015, the Companies Registry commenced proceedings on 13 October 2017 to strike the Company off the register; and

(e) those proceedings were halted on 16 January 2018 following an application made by Messrs MinterEllison on 11 January 2018.

4.  P wishes to remove D as a director, retrieve all books, accounts and records of the Company from D and take all such steps as are necessary to ensure that the Company complies fully with the requirements of the CO.

Applicable principles

5.  Section 570 of the CO, in pertinent part, provides as follows:

“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.

(2) The Court may, either of its own motion or on application—

(a) by a director of the company; or

(b) by a member of the company who would be entitled to vote at the meeting,

order a general meeting of the company to be called, held and conducted in any manner the Court thinks fit.

(3) If the order is made, the Court may give any ancillary or consequential directions that it thinks expedient.

(4) Directions given under subsection (3) may include a direction that one member of the company present at the meeting in person or by proxy is to be regarded as constituting a quorum.”

6.  Section 570 of the CO replaced section 114B of the Old CO in substantially equivalent terms. Section 114B arose for consideration in JT Limited v Kung Tat Chow [2014] HKCFI 1556 concerning an application for an EGM to be convened and that one member of the Company present be sufficient to constitute a quorum. The purpose of the EGM was ultimately to remove a director. The relevant principles are set out in §§15-21 of the judgment of Ng J.

7.  To obtain an order under section 114B, the applicant must satisfy the twofold test explained by Yuen JA in Success Plan Limited [2002] 3 HKLRD 560 at 568C, namely, that

(a) it is “impracticable” to call a meeting; and

(b) the court must be satisfied that it should exercise its discretion to convene a meeting.

Attempts to call an EGM

8.  Under the Articles, an ordinary resolution is required to remove a director[1] and the quorum for all general meetings shall be 2 members personally present and holding either in his own right or by proxy least 1/10^th of the paid-up capital of the Company[2].

9.  P made 2 attempts to call an EGM:

9.1 The 1^st attempt:

(a) on 9 November 2023, P requested[3] the Board to call and convene an EGM of the Company within 21 days after receiving the requisition (i.e. on or before 30 November 2023) and gave special notice[4] of P’s intention to move the resolution at the requested EGM;

(b) while acknowledging receipt of P’s request, D asked when and how P acquired 99.9% of the shares in the Company and when and where the requested EGM will take place;

(c) P’s solicitors replied, attaching copies of the Return of Allotment dated 29 July 2013 and the 2014 Annual Return which answered the queries;

(d) on 11 November 2023, LEH sent D by email a draft resolution (“the Resolution”) to remove D as director of the Company; and

(e) the Board could not comply with P’s request because D failed to respond.

9.2 The 2^nd attempt:

(a) on 14 December 2023, P gave notice to the Company’s members, the Board and former auditor pursuant to section 568 of the CO for an EGM to be held on 15 January 2024 at the office of its solicitors and via teleconference for the passing of the Resolution as an ordinary resolution (“Notice of EGM”); and

(b) 2 reminders were sent to D who, having acknowledged receipt of the 1^st reminder complained that his earlier queries had not been answered and did not attend the EGM which was rendered inquorate pursuant to Article 23 and dissolved pursuant to Regulation 56 of Table A.

P’s application

10.  As P and D are the only 2 members of the Company and constitute the entire Board, I accept the submission that the consequence of D’s refusal to call an EGM in his capacity as a director and his refusal to attend an EGM upon requisition of members in his capacity as a member of the Company is that the Company is effectively paralysed.

11.  In these circumstances, this is clearly a case where P has shown that it is “impracticable” to convene a meeting.

12.  The remaining question is whether the Court is satisfied that it ought to exercise its discretion.

13.  An unexplained matter arising from the evidence is why the present application was only made in November 2023 when the Companies Registry’s discontinuance of the striking off proceedings took place as long ago as 16 January 2018.

14.  The exhibit LEH-1 to the affirmation of LEH dated 4 March 2024 includes[5] the 1^st page of a letter dated 17 December 2015 from the Companies Registry to LEH alerting him to the fact that the Registry had been informed by (a) Primasia Corporate Services Ltd that they have ceased to provide the Company with its registered office as from 1 April 2015; and (b) Star Supreme Enterprise Limited of their cessation of providing secretarial to P.

15.  Whilst it is unclear on whose behalf Messrs MinterEllison had acted in submitting the objection to the striking of dated 13 October 2017, Mr Pryderi Diebschlag of Messrs Clyde & Co, solicitors representing P, considers it likely that after receipt of the Companies Registry’s letter, LEH instructed Messrs MinterEllison to handle the matter although he has no instructions as such.

16.  By late 2023, LEH was concerned that the Company’s assets have not been properly accounted for. Before steps could be taken to investigate the matter, it is necessary for P to assume control of the Company, necessitating the present application.

Conclusion

17.  In the circumstances, I am satisfied that the Court should exercise its discretion to convene a meeting. Accordingly, I make an order in terms of paragraphs 1, 2 and 3 of the draft order submitted with the papers.

18.  P submitted its statement of costs in these proceedings and seeks an order that such costs be paid by D to P forthwith, such costs to be summarily assessed.

19.  P is clearly entitled to the costs of this application, such costs to be summarily assessed and payable forthwith. Having considered the statement submitted, the costs are summarily assessed at HK$150,000.