CHAN YU CHING v. LAM PUI CHI AND ANOTHER

HCMP 519/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 519 OF 2012

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J U D G M E N T

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1.  I have before me an originating summons issued on 22 March 2012 by Mr Chan Yu Ching for an order under section 114B of the Companies Ordinance that an extraordinary general meeting be convened in order for the company’s shareholders to consider an ordinary resolution for the appointment of the Plaintiff and his brother, Mr Chan Siu Shan, Sam, as additional directors of the company.

2.  The company had, until March 2008, two shareholders, Chan Hay Shun and the 1st defendant, who were the registered shareholders of 70 and 30 per cent of the company’s issued shares respectively.

3.  On 18 March 2008, Chan Hay Shun, who is the father of the Plaintiff, died.  Following his death, his shares were transmitted to the Plaintiff as administrator of his estate.

4.  There is a dispute between the parties about whether or not the 1st defendant holds the shares registered in her name on trust for Chan Senior’s estate, but that is not material to this dispute.  I shall assume that she is both the legal and beneficial owner of the 30 per cent of the company’s issued shares registered in her name.

5.  The 1st defendant is the sole director of the company.  The Plaintiff is unable to cause the appointment of additional directors because the 1st defendant will not attend an extraordinary general meeting which is necessary in order to pass a resolution appointing them to the board of the company.  The reason for the 1st defendant’s refusal to attend such a general meeting appears to be this.  She currently occupies a property owned by the company.  As I understand it, the reason that she occupies that property is because she had an intimate relationship with Chan Senior in the past.  She is concerned that if the Plaintiff and his brother are appointed directors, they will cause the company to do something which interferes with her occupation of the property.  There is, however, no evidence before me which demonstrates that this concern is justified, even if perhaps it is understandable.

6.  That having been said, even if there was reason to think that the Plaintiff and his brother were intending that, for example, the property be sold, that would amount to a reason to prevent the majority shareholder exercising its voting rights to secure representation on the company’s board.

7.  A technical point has, up until now, been taken, namely that the company’s articles require any director to have a shareholding in the company.  This is obviously wrong, as Article 4 clearly states that this is not necessary, and Article 66 of Table A, which was relied on to justify the argument, does not apply to this company.

8.  The principles which guide the court’s determination of applications under section 114B are explained in Yuen J’s decision in Re Success Plan Limited [2002] 3 HKLRD 560 and my decision in Re Mandarin Capital Advisory Limited [2011] 2 HKLRD 1003.  In very simple terms, they are:

(i) that the court is satisfied it is impracticable to call a meeting;

(ii) the court is satisfied that it should exercise its discretion to convene a meeting.

9.  In the present case, there is no dispute that the first criteria is satisfied.  So far as the second criteria is concerned, it does not seem to me that any legitimate reason has been advanced by the 1st defendant for preventing the Plaintiff from exercising in a conventional way the rights of a majority shareholder.

10.  What the 1st defendant appears to have been inviting the court to do is to take into account considerations that may be relevant to what I understand are proceedings brought by her for some form of provision out of the estate of Chan Senior.

11.  For the kind of reasons that I explained in Re Mandarin Capital Advisory Limited, it seems to me that they are not relevant to an application of this sort in which the decision should be kept as simple as possible and focus firmly on whether or not the inability to satisfy a core requirement is preventing the provisions of a company’s articles and the provisions of the Companies Ordinance being operated properly by the shareholders of the company.

12.  I will therefore make the following order:

(i) an extraordinary general meeting be convened at 10 am on Friday, 25 May 2012 at the office of Messrs Cheung & Choy at Room B, 5th Floor, C.T.S. House, 78-83 Connaught Road, Central, Hong Kong, to consider and, if thought fit, to pass an ordinary resolution that Mr Chan Yu Ching and Mr Chan Siu Shan, Sam, be appointed as additional directors of the company;

(ii) the attendance by one member, either personally or by proxy, shall constitute a quorum at the said extraordinary general meeting;

(iii) notice of an extraordinary general meeting signed by the plaintiff given seven days before the date of the extraordinary general meeting shall be sufficient and lawful notice for the convening of the said extraordinary general meeting;

(iv) there be general liberty to apply; and

(v) the costs of this application be paid by the 1st defendant to the plaintiff.