LUK HIN MAN LAWRENCE AND ANOTHER v. LOK HIN CHING AND OTHERS

HCMP2456/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2456 OF 2009

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D E C I S I O N

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1. I have before me an application for an order under section 111(2) or section 114B of the Companies Ordinance. Cap. 32 for an order that :

“(1)    that an Annual General Meeeting (‘AGM’) of Grand Hill Enterprise Limited (the ‘Company’) be convened and held by the Plaintiffs at 11^th Floor, Kwong Hing Building, 959 Canton Road, Mongkok, Kowloon, Hong Kong for the purpose of considering and if thought fit passing the resolutions set forth in the Schedule hereof and that 21 days’ notice in writing of the convening of the AGM shall be given by the Plaintiffs to the 1^st and 2^nd Defendants;

 (2) that the Court may give directions as to the manner in which the AGM is to be called, held and conducted and all such ancillary and consequential directions as it may think expedient;

(3) liberty to apply; and

(4) the 1^st Defendant do pay the costs of this application, to be taxed, if not agreed.”

2. The Schedule referred to in paragraph 2 of summons lists the following matters :

“Schedule of Proposed Resolutions

To consider and vote on the following matters:-

(a) the Reports and Financial Statements of the Company for the years respectively ended 31^st March 2004, 31^st March 2005, 31^st March 2006, 31^st March 2007, 31^st March 2008 and 31^st March 2009;

(b)    the declaration of dividends [which the plaintiffs abandoned at the hearing];

(c) the re-election of directors;

(d) the appointment of auditors and their remuneration; and

(e) the transaction of any other business.”

3. The Company has since about 16 April 2003 had the following 4 shareholders :

(1) Anew Group Limited (“Anew”), which has 9,994 shares;

(2) the 1^st defendant, who has 2 shares;

(3) the 1^st plaintiff, who has 2 shares; and

(4) the 2^nd plaintiff, who also has 2 shares.

4. The first directors of the Company were the plaintiffs and the 1^st defendant who are brothers.  The brothers are currently involved in litigation concerning the Company and other companies of which they are shareholders.

5. Anew has filed an acknowledgement of service indicating that it will not oppose the application. 

6. It is not in dispute that the Company has not held a general meeting of any sort since it was incorporated on 5 March 2003.  Article 7 of the Articles of Association provides that :

“At the Ordinary General Meeting to be held next after the adoption of these Articles and at every succeeding Ordinary General Meeting all Directors, except Permanent Directors if any are appointed, shall retire form office and shall be eligible for re-election”.

The plaintiffs read this Article as operating to cause the automatic termination of the existing directorships at the latest date by which the first annual general meeting should have taken place.  The plaintiffs argue that as a consequence there are no directors to convene a general meeting of the Company and this necessitates the intervention of the court.  It follows (assuming that the intervention of court is required) that the appropriate procedure is to seek an order under section 111(2) rather than section 114B.

7. I disagree that Article 7 operated to determine the directorships.  On the face of the Article it only operates if there is an ordinary general meeting.  This accords with how one would expect such an article to operate, namely, the existing directors stay in office until such time as the company meets in general meeting and has the opportunity to consider the reconstitution of the board.  That having been said as the application has been made and has been necessitated in part by the fact that there are disputes between the shareholders I propose to make the order sought, but before doing so I should address briefly the objections of the 1^st defendant.

8. I have been presented by the 1^st defendant’s solicitors with a relatively lengthy skeleton argument, which contains speculation about what the true motives of the plaintiffs are in attempting to convene a general meeting.  The short response to the 1^st defendant’s complaints is that the Company should hold general meetings to regulate its affairs in accordance with the Companies Ordinance and its Articles of Association.  None of the 1^st defendant’s concerns and arguments explain why it should not do so.  If the 1^st defendant believes following a general meeting that the plaintiffs have behaved improperly he can make the necessary application to court at that time.  It would be wrong for the Company to be prevented from convening a general meeting because of the 1^st defendant’s concern that his brothers cannot be trusted.

9. I, therefore, make an order in the terms of paras (1) and (3) of the Originating Summons and paras (a), (c), (d) and (e) of the Schedule.  I will make no order as to costs.  The application was in my view strictly speaking unnecessary as was the 1^st defendant’s objection to it.