CYNTIA HENDRAYANI AND ANOTHER v. OLIGO ASIA ENVIRONMENTAL GROUP LTD AND OTHERS

HCMP 112/2023

[2023] HKCFI 3080

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 112 OF 2023

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BETWEEN

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REASONS FOR DECISION

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Overview

1.  By an Originating Summons filed on 20 January 2023 (“OS”), Cyntia Hendrayani (“P1”) and Tael Two Partners Limited (“P2”) (collectively “the Plaintiffs”) seek relief pursuant to Section 42 of the Companies Ordinance, Cap 622 (“the Ordinance”). The defendants are Oligo Asia Environmental Group Limited (“D1” or “the Company”), Jacques Isaac Assouline (“D2”) and the Registrar of Companies (“the Registrar”) as the 3^rd defendant.

2.  The application is necessitated by the unauthorised filing of documents at the Companies Registry (“CR”) by D2. At all material times, D2 together with P1 were and are the only rightful directors of the Company.

3.  The documents filed without the authority of the Company are the following:

(a) a document recording the removal of P1 as director of D1 from the 26 September 2022 onwards (“the Removal”); and

(b) the allotment of 99 shares in the Company to SABA Holdings Limited (“SABA”) on 7 July 2022 (“the Allotment”).

4.  The Plaintiffs seek the following relief:

(1) A declaration that the Removal and Allotment are null and void.

(2) An order for removal of the following documents filed with the CR or, alternatively, rectification of the information therein:

(a) the Return of Allotment (Form NSC 1) dated 7 July 2022;

(b) the Annual Return (Form NAR 1) dated 21 September 2022; and

(c) the Notice of Change of Company Secretary and Director (Appointment/Cessation) (Form ND2A) dated 26 September 2022 (collectively, “the Documents”).

(3) An injunction restraining D2 from (i) acting, or holding himself out, as the sole director of the Company; (ii) acting on behalf of the Company without the consent of P1; and (iii) relying on the Documents.

5.  D2 filed 2 affirmations, respectively dated 7 March 2023 and 14 April 2023 on behalf of himself and D1 opposing the OS. However, neither D1 nor D2 appeared at the hearing.

6.  The Registrar’s attendance has been excused.

7.  At the conclusion of the hearing, the Court made an order in terms of the OS for the reasons set out below.

Background facts

8.  The Company, an investment holding company, was incorporated in Hong Kong on 29 August 2018.

9.  It held 80% equity in an Indonesian company called PT Oligo Infra Swarna Nusantara (“the Project Company”) which was established for the purpose of building, financing and operating an integrated eco-friendly waste processing facility in the City of Tangerang, Indonesia (“the Project”). The other stakeholder in the Project Company is PT Oligo Infrastruktur Indonesia (“OII”).

10.  Prior to the acts complained of in §3 above, Oligo Asia Infrastructure Group Limited (“OAIG”), incorporated in Hong Kong, was the 100% owner of the Company and P1 and D2 were its only directors.

11.  P2, incorporated in the Cayman Islands, was the owner of 80% of OAIG with SABA, a company incorporated in Hong Kong, owning the remaining 20%.

12.  P1, through searches made at the CR between August and October 2022, discovered the Documents specified §4 (2) above.

13.  The net effect of the Documents was to represent the public that

(i) SABA had become the majority shareholder of the Company holding 99 out of 100 issued shares with effect from 7 July 2022; and

(ii) P1 ceased to be a director of the Company and D2 became its sole director with effect from 29 August 2022 or 26 September 2022.

14.  It is P1’s evidence that as one of 2 directors of the Company,

(i) she never authorised the Allotment nor had she received any application for the same: and

(ii) she never submitted any letter of resignation to the Company and never received any notice of shareholders meeting or Board meeting regarding any proposal to remove her as a director of the Company.

15.  Then on 9 December 2022, D2 also took steps to seize control of the Project Company by, inter alia, removing P1 as one of its directors such that both the Company and the Project Company are under D2’s control.

16.  The acts referred to in §§13-15 above resulted in diluting P2’s ultimate interest in the Project Company from 64% to 0.64% and increasing SABA’s stake to 79.36%.

17.  Since 9 December 2022, the Plaintiffs’ legal representatives Messrs Angela Wang & Co (“AWC”) have made repeated demands to D1 and D2 to provide an explanation and/or documentary evidence to prove the propriety of the Allotment and Removal. D1 and D2 gave no explanation nor did they adduce any evidence to show that the acts carried out complied with the requirements of the Ordinance.

18.  On 19 January 2023, the Plaintiffs issued the OS.

19.  On 7 March 2023, D2 filed his 1^st affirmation (“D2 1^st”) on behalf of himself and D1. They sought to invoke an arbitration clause in the Engagement Letter requiring the parties to submit disputes for arbitration in Singapore. They alleged that P2 failed to fulfil its investment obligations under the Partnership Agreement rendering it necessary for SABA to step in and that P1’s removal as director of the Company “followed strict notice of more than 28 days”.

20.  D2 1^st did not attach any evidence of the alleged notice nor any evidence of any resolutions passed by the Company.

21.  On 14 April 2023, D2 filed his 2^nd affirmation also on behalf himself and the Company (“D2 2^nd”). D2 produced a notice of meeting dated 26 August 2022 (“the Notice”) given in respect of an EGM scheduled for 26 September 2022 as well as minutes of that EGM purporting to show that it was resolved at that meeting to remove P1 as director of the Company.

Applicable principles

22.  Section 42 of the Ordinance[1] empowers the Court to direct the Registrar to rectify any information on the CR and removing any information from it. The Court may do so if it is satisfied that (a) the information derives from anything that is invalid or ineffective or has been done without the company’s authority or (b) the information is factually inaccurate or derives from anything that is factually inaccurate or forged.

23.  The ordinary remedy is rectification. Removal is permissible if the conditions prescribed in subsection (4) for ordering the removal of information are satisfied. Those conditions are that

(i) the continuing presence of the information on the CR will cause material damage to the company; and

(ii) the company’s interest in removing the information outweighs the interest of other persons in the information continuing to appear on the CR.

See Re China Nice Education Research Publishing Investment and Management Co Ltd [2016] 3 HKLRD 525 at §§13-17.

24.  The threshold for removal rather than rectification is not high. If there is a prospect of damage being caused to the company by the information on the register, that would justify removal: see per Cheng J in Noble Crest Limited v Chau Yuet Ching Brenda [2023] HKCFI 115 at §23.

25.  The Court also has power under Section 42(5) of the Ordinance to make any “consequential order that appears to be just with respect to the legal effect (if any) to be accorded to the information by virtue of its having appeared on the [CR]”.

26.  Such consequential order could include an injunction to restrain the wrongdoer from making wrongful claims about his role in the company. The onus is on the applicant to show that the injury to be inflicted would be of such a character that the claimant could not practically be compensated in damages: see Cheer Holdings Limited and Another v Cheung Kin Wah [2018] HKCFI 404 (at §§58-62 and 65 (2)).

Issues

(A) Jurisdiction

27.  The application before the Court is an application made pursuant to section 42 of the Ordinance. It applies to the Company, being a company incorporated in Hong Kong.

28.  The issues that arise concern compliance with the statutory requirements for an allotment of shares in a Hong Kong company and for the removal of a director. They do not involve any dispute between the parties arising out of the Partnership Agreement.

29.  The arbitration clause contained in the Partnership Agreement has no application as it only applies to disputes between the parties to that Agreement.

30.  The fact that there may be intended claims against P1 and/or P2 under the Partnership Agreement by the other partners is not a defence to a section 42 application: see Re Keen Sino Investment Limited [2022] HKCFI 2866 at §33.

31.  I am satisfied that this Court has jurisdiction to hear and determine the section 42 application.

(B) The Allotment

32.  Directors of a company may allot shares in the company provided the company gives approval in advance by resolution: see section 141 (a) of the Ordinance.

33.  The Allotment was allegedly made on 7 July 2023. Not only is there no evidence of the requisite shareholders’ resolution for the Allotment, as one of 2 directors of the the Company at the relevant time, D2 could not have exercised power of allotment on his own.

34.  While the decision of the directors may be taken by a majority of the directors at a meeting (Article 6), or by a unanimous decision of the directors (Article 7), P1’s evidence is that no such meeting took place nor was she aware of, much less agree to, the proposed Allotment.

35.  I agree that the Allotment was invalid, ineffective and/or done without the Company’s authority.

(C) The Removal

36.  A necessary consequence of § 35 above is that the Allotment of 99 shares to SABA was invalid. That in turn means that SABA had no right to attend, chair or vote at the EGM said to have taken place on 26 September 2022. Given that scenario, the basis for the alleged EGM must fall away, and the Removal said to have been resolved at the EGM must be a nullity.

37.  Even if it were necessary to consider the validity of the Removal on its own, one would reach the same result for the following reasons:

(1) Notice pursuant to section 571 of the Ordinance is necessary in order to convene a general meeting of the Company.

(2) Where the EGM is to seek the removal of a director of the Company, a “special notice” must be given to the director concerned, namely P1: see sections 462(4), 463 and 578 of the Ordinance

38.  D2 belatedly exhibited to D2 2^nd the Notice together with a courier receipt as evidence of notice to P1 convening the EGM. This evidence is problematic:

(1) First, while there was a shipment addressed to P1 received by “one counter clerk” at Kembangan, Jakarta (a part of West Jakarta) at “13:45 on 26 August 2022[2]”. There is no record to show that the shipment reached P1.

(2) Second, P1 exhibited the record of her Google timeline that shows that between 12:04 and 13:35 on 26 August 2022, she was at PIK Avenue mall situated in North Jakarta. She could not have received the shipment at the time stated on the receipt.

(3) Third, it is inexplicable why D2 would give notice of the EGM to P1 by way of using a courier when the 2 directors had always used email and WhatsApp as their primary means of communication.

39.  The failure to give a valid notice for the EGM is a substantive defect that the “irregularity principle” cannot cure: see Re Bluetroz Technology Limited [2022] HKCFI 3645 at §13.

Removal of the Documents

40.  As earlier noted, the Court’s power to remove documents which fall within Section 42 (1) may be exercised if the further conditions[3] stipulated in subsection (4) are satisfied.

41.  The Project, carried out by the Project Company in which the Company has an 80% interest, is ongoing. Accuracy of the information relating to the directors and shareholders of the Company is a matter of importance since 3^rd parties dealing with the Company and/or the Project Company may wish to ascertain the identity of those with whom they are dealing.

42.  The ongoing contract of the Project Company involves a working relationship with the Tangerang City Government and any perceived change of shareholding structure control of the Project Company could jeopardise that contract.

43.  I am more than satisfied that the continuing presence of the wrong information on the CR will cause material damage to the Company. Removal of the Documents will not occasion any prejudice to D2 since he can have no interest in maintaining and preserving wrong information on the CR.