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CACV000010/1990
Civil Appeal No. 10 of 1990
IN THE COURT OF APPEAL
HONG KONG
(On Appeal from MP No. 2245 of 1989)
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IN THE MATTER of Section 168A of the Companies Ordinance, Cap. 32, Laws of Hong Kong
and
IN THE MATTER of Yun Jip Auto Services Limited
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BETWEEN
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Yuen Sau Fai |
1st Petitioner
(1st Respondent) |
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Liu Chuen Wo |
2nd Petitioner
(2nd Respondent) |
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Liu Wing Chan |
3rd Petitioner
(3rd Respondent) |
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Ng Pei Wah |
4th Petitioner
(4th Respondent) |
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AND
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Yun Jip Auto Services Limited |
1st Respondent |
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Liu Wai Pak |
2nd Respondent
(1st Appellant) |
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Lai Hung Kei |
3rd Respondent
(2nd Appellant) |
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Liu Chun Sing |
4th Respondent
(3rd Appellant) |
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Lee Man Cheong |
5th Respondent
(4th Appellant) |
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Lui Ki Cheuk |
6th Respondent
(5th Appellant) |
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Choi Kam Chuen |
7th Respondent
(6th Appellant) |
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Coram: Hon Sir Derek Cons, V-P, Kempster, JA and Barnes, J
Date of Hearing: 15 March 1990
Date of Judgment: 15 March 1990
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JUDGMENT
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Kempster, JA:
1. On 4 January 1990 Jones J dismissed an application on the part of the respondent shareholders to strike-out the whole of a Petition, filed by four other shareholders in a bus-operating company called Yun Jip Auto Services Limited, whereby relief is sought pursuant to s 168A of the Companies Ordinance (Cap 32). Against that determination the respondents appeal; once more seeking an order to strike out the whole of the Petition as being an abuse of the process of the court. They rely upon the terms of RSC Order 18 rule 19 and, insofar as necessary, pray in aid the inherent jurisdiction.
2. The Petition alleges, for the purposes of a striking-out exercise to be taken at its face value, that: -
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(1)
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In January 1987 the respondents unlawfully withdrew $150,000 from the company's bank account and, despite repeated demands and requests, have failed to repay that sum.
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(2)
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Despite being validly removed from the office of director one of the respondents continued to act as such.
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(3)
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The respondents purported to dismiss the fourth petitioner as a director in the absence of an appropriate resolution or compliance with the appropriate procedure laid down in the Companies Ordinance and in this particular company's articles.
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(4)
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The respondents had initiated legal proceedings against the petitioners without any proper basis and without proper authority.
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(5)
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Unlawfully and without complying with the provisions of the Ordinance or of the articles the respondents had purported to pass a resolution revoking the bank-signature rights of two of the petitioners with the result that one of the company's bankers had frozen the company's bank account causing unnecessary and damaging disruption to its business.
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(6)
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The respondents had purported to dismiss the first petitioner from the board without complying with the terms of the Ordinance or of the articles.
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(7)
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In July 1989 two of the respondents had removed books of account and the chop of the company, again without any authorisation, or due entitlement and, despite requests for their return, had continued to detain. them causing inconvenience and disruptions in the management of the company's affairs. |
3. In relation to all these allegations the substantial argument urged upon us is that they did not affect the petitioners qua members as they must, as Jones J recognised, in order to found jurisdiction to grant the relief sought. But the conduct alleged, particularly that disrupting the company's business and involving the abstraction of its monies, must, in my view at least, arguably affect the rights and interests of some part of the company's members. Section 168A(1) reads: -
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"Any member of a company who complains that the affairs of the company are being conducted in a manner unfairly prejudicial to the interests of some part of the members (including himself) ...may make an application to the court by petition for an order under this section." |
4. The way in which the interests of members may be affected was explained by Clough JA in Terrian Ltd and Ors v Oriental Peer Co [1988] 1 HKLR 246 at p 254 by reference to a speech of Lord Buckmaster in Macaura and Northern Assurance Co Ltd [1925] AC 619 at p 626 in which he had:-
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"... indicated that the shareholder has no right to any item of the company's property but is entitled to a share in the profits while the company continues to carry on business and a share in the distribution of the surplus assets when the company is wound up." |
5. A number of the allegations made in the petition would, I think, arguably affect the dividends to be expected by members of the company or a part of such members or their contingent interests in a winding up. It is also in my view arguable that by unlawfully excluding several of the petitioners as directors the respondents have prejudiced their interests in the proper conduct of the affairs of the company. As these matters may well fall finally to be determined by another tribunal I put it no higher. A party seeking to strike-out the whole of any pleading, as defined in RSC order 18 rule 19(3), undertakes a very heavy burden and one which, in my opinion the respondents have come nowhere near discharging.
6. Since necessarily the judge had exercised his discretion in refusing the application we could only interfere to the extent that such exercise was in some way vitiated. It may be that, by reason of his apparent reliance on what_ he described as "a partnership" aspect to the various shareholdings in this company, it was. The Petition, on which alone he relied, contains no relevant supporting allegation. Further, his references to considerations apt for an application to wind up were relevant only to proceedings brought pursuant to s 177(1)(f) on the "just and equitable" ground. If, therefore, it were necessary for this court to exercise its own discretion I would so exercise it as to refuse the relief sought before us. Generally, I would dismiss the appeal.
Cons, V-P:
7. I agree with my Lord that in fact this petition should not be struck out. I am comforted in that view by the acceptance of Mr Poon, who appears for the respondents to the Petition, that the allegations made therein do need to be tested in some form of judicial proceedings. I accept that the Petition could have been drafted in such a way as would have made the application before Jones J unlikely to succeed from the very beginning. But in my view the various allegations, even if some themselves are not sufficient ground, taken together may well come within the ambit of Lord Keith's concept of "conduct designed to react on the rights of members as such" : Elder v Elder (1952) SC 49 at p 58. Certainly, I am not persuaded that they plainly and obviously do not.
Barnes, J :
8. I agree with the order proposed.
(Sir Derek Cons)
Vice-President |
(Michael Kempster)
Justice of Appeal
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(Eric Barnes)
Judge of the High Court
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Representation:
Winston Poon (M/s Woo & Woo) for Respondents/Appellants
Francis Eddis, QC and Kenneth Chan (M/s Raymond Hung & Co) for Petitioners/Respondents
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