RE PCCW LTD

CACV 85/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 85 OF 2009

(on appeal from HCMP NO. 2382 of 2008)

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REASONS FOR DECISION ON
THE APPLICATIONS FOR LEAVE TO APPEAL
TO THE COURT OF FINAL APPEAL

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Hon Rogers VP:

1.   When refusing the applications made on behalf of the Company and PCRD and Starvest Limited for leave to appeal to the Court of Final Appeal at the conclusion of the hearing on 18 August 2009, this court said it would give its reasons in writing. The same abbreviations will be used as were used in the reasons for judgment handed down on 11 May 2009.

2.   On 23 April 2009, almost immediately after this court gave its decision on 22 April and well before the Reasons for Judgment were handed down on 11 May 2009, it was announced that the Scheme would no longer be pursued and had lapsed. In the light of that, Mr Harris SC, who appeared for the Company on this application, commenced his submissions by saying, in his own words, that the Scheme was dead and no appeal to the Court of Final would revive it. He continued by saying that any appeal would be academic, he suggested that it would be unlikely that this court would grant leave to appeal. Miss Chan, who appeared on behalf of PCRD and Starvest Limited also presented her argument on the basis that any appeal would be academic, save as regards the orders for costs which had been made against her clients.

3.   It would only be in exceptional circumstances that it would be right for this court to grant leave to appeal to the Court of Final Appeal in respect of a matter which was undoubtedly academic. In this case there are further considerations on this aspect. The Administration has made it clear that it plans to review and improve the relevant rules and regulations, in particular the provisions in the Companies Ordinance and the Codes on Takeovers and Mergers, specifically in relation to the privatisation of companies. It is clear that the provisions of the Ordinance relating to schemes of arrangement and privatisation of companies will be the subject of thorough review as part of the rewrite of the Companies Ordinance and that the Financial Services and the Treasury Bureau has stated in their Plan:

“We aim at issuing any proposed changes on this subject, as part of the Companies Ordinance Rewrite exercise, for public consultation in the fourth quarter of 2009.”

4.   Thus not only would any appeal in this matter be academic in the sense of not, in any way, reviving the Scheme which was the subject of the petition, but the statutory provisions and the provisions of the Codes on Takeovers and Mergers are scheduled for imminent review, public consultation and any changes are expected to be incorporated into the rewrite of the Companies Ordinance which is at present underway. Hence, in the foreseeable future, any questions arising under the existing law are likely to become of historical interest.

5.   The various questions in the Notices of Motion were not individually addressed in the course of the application for leave, although they were referred to briefly in the skeleton arguments. As a general point, it may be said that what was submitted on behalf of the SFC and Hung Sau Chun and Wong Tak Lau is clearly correct. The first point made was that whether or not there is public interest in a matter does not make any question which has been framed a matter of great general or public importance. In my view no questions of great general or public importance have been put forward. Apart from the fact that any appeal would be in respect of academic questions, it can be said that in respect the questions that are contained in the notices of motion are generalised questions and are unsuitable for submission to the Court of Final Appeal. Many do not arise out of this court’s judgment in this case, for example questions 5 and 8 of the Company’s notice of motion are not directed to the basis of the judgment this court at all.

6.   Both the Company and PCRD and Starvest Limited also sought to raise questions under the “or otherwise” limb. The questions raised by PCRD and Starvest Limited relate entirely to the facts and a decision in respect of them would achieve nothing. There is no ground for considering that the exceptional course of giving leave to appeal on this limb would be appropriate. Likewise, the questions raised under this heading in the notice of motion by the Company are again fact sensitive and have the added difficulty, which is manifested in some of the other questions, that they seek to isolate factors as to how a court may exercise its discretion divorced from a situation where court does exercise the discretion taking into account all relevant factors.

7.   For these reasons I considered that leave should not be given. I would make an order nisi that the costs of these applications be borne by the respective parties that made them.

Hon Lam J:

8.   I agree with the judgment of the Vice-President. In our judgment allowing the appeal, this court considered the matter in accordance with the well settled approach summarized in Buckley on the Companies Acts 14^th Edn p.473. There is no dispute about that approach. The debate in the appeal was in substance about the application of that approach to the facts of this case, particularly when there was evidence suggesting that there were vote manipulation at the scheme shareholder meeting.

9.   On the evidence, this court concluded that for the purpose of the Section 166 application the majority resolution is tainted by vote manipulation and the court should not exercise its discretion to approve the scheme. This court did not attempt to set out any test for vote manipulation which, as mentioned in the judgment, can take many forms and can manifest in different ways. Rather the test applied is the one set out in Buckley, viz. whether the majority resolution passed at the meeting is fairly represented and acting bona fide in the interest of the class.

10.   Focusing one’s mind on the real issues determined in the appeal, I do not think there is any justification for them to be debated in the Court of Final Appeal, particularly when the whole matter has become academic for the reasons given by the Vice-President.

Hon Barma J:

11.   I agree.