HUI KWOK WAH v. HUANG HSIN YANG AND OTHERS

HCMP 1744/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1744 OF 2006

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J U D G M E N T

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I.  Introduction

1.  There has been a long history of litigation among the shareholders, especially as between Hui and Huang.  But the question before me today is short and simple. It is whether resolutions passed at Grand Palace's 12 December 2005 EGM were or were not valid. 

2.  The main resolution passed at the EGM purported to increase Grand Palace's share capital from $10,000 to $310,000. 

3.  Hui says that all resolutions passed were invalid because the EGM was inquorate.  Huang (with support from Sky Harvest and Poon) maintains otherwise.

II.  DISCUSSION

4.  Immediately before the EGM, Grand Palace had a paid-up share capital of $10,000, divided into 10,000 shares.  Its shareholders were Hui (4,000 shares), Shum Lok Nin (1,000 shares), Huang (4,000 shares), Sky Harvest (500 shares) and Poon (500 shares).

5.  Article 1 of Grand Palace's Articles of Association (AA) provides that Table A applies to the company, except to the extent that Table A conflicts with the AA's express provisions.

6.  AA Article 23 provides that:

"For all purposes, the quorum for all general meetings shall be two members personally present and holding either in his own right or by proxy at least fifty-one per cent of the paid-up share capital of the Company, and no business shall be transacted at any General Meeting unless the requisite quorum be present at the commencement of the business."

7.  Table A, Article 45 provides that a company may increase its share capital by ordinary resolution.

8.  At the EGM only Huang and Sky Harvest were present in person, Sky Harvest having sent a representative.  Poon was present by a proxy given to Huang.

9.  Thus, the 2 persons (Huang and Sky Harvest) present at the EGM only held 50% of the paid-up share capital between them.  The quorum requirement of a 51% shareholding in AA Article 23 was not met.

10.  All resolutions passed at the EGM, including that to increase Grand Palace's share capital, were consequently invalid.

11.  Mr. Jimmie Ho (appearing for Hui) further submits that some resolutions passed at the EGM were invalid because insufficient notice of them had been given.  The notice convening the EGM (Mr. Ho says) did not give a full and accurate picture of the nature of those resolutions.

12.  In light of my conclusion on quorum, I need not deal with this additional argument of invalidity raised by Mr. Ho.

13.  Mr. Kelvin Leung (appearing for Huang and Grand Palace) asserts that Hui and Shum had in effect agreed to waive the quorum requirement in AA Article 23.

14.  Mr. Leung says that Hui and Shum signified such waiver by themselves convening (and passing resolutions) at later EGMs on 12 December 2005 and 11 January 2006.

15.  The resolutions so passed were prejudicial (Mr. Leung points out) to the interests of Huang, Sky Harvest and Poon.  Nonetheless, they were made at meetings solely attended by Hui and Shum, who together would have held no more than 50% of Grand Palace's paid-up share capital.

16.  I do not accept Mr. Leung's contention.

17.  Two wrongs do not make a right.  The mere fact that Hui wrongly purported to pass resolutions at inquorate meetings held after the first 12 December 2005 EGM, would not estop Hui from bringing the present summons to enforce his rights under AA Article 23.

18.  Proceeding with an inquorate meeting does not constitute a clear representation that one has agreed to waive the requirements of AA Article 23.  The taking of an improper step before or after event X cannot without more be treated as accepting a like impropriety in relation to X.

19.  I note that Hui claims to have been unaware of AA Article 23 and its consequences at the time of the later 12 December 2005 and 11 January 2006 meetings.  He accepts that any resolutions passed at those EGMs were likewise invalid due to a lack of quorum.

III.  CONCLUSION

20.  The application by Hui succeeds.

21.  There will be a Declaration that the resolutions passed at Grand Palace's first EGM on 12 December 2005 were invalid due to lack of quorum.

22.  I shall hear counsel on costs and consequential orders.