Triumph Access Ltd v. Redford International Ltd

HCMP 1837/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1837 OF 2015

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D E C I S I O N
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1.This is an application by originating summons by the plaintiff, Triumph Access Limited, for an order pursuant to the Companies Ordinance, Cap 622, that Redford International Limited (“the Company”) do register the transfer of one ordinary share of the Company from Happy Bond International Limited, the transferor, to the plaintiff.

2.Redford International Limited is a company incorporated in Hong Kong limited by shares with an issued share capital comprising 100 shares.  The transferor, which is in the same group of companies as the plaintiff, is a shareholder of the Company holding 51 shares during the period from 7 June 1994 to 16 June 2014.  The other shareholders of the Company are Tuenbo Company Limited holding 48 shares, and Mr Cheung Sung Lam holding one share - Tuenbo being a company controlled by Mr Cheung and his wife.  The Company was set up as a joint venture company between the transferor and Tuenbo to develop certain properties in mainland China.  The shareholders have not, however, entered into any shareholders agreement with respect to the Company.

3.The board of directors of the Company comprise two directors appointed on behalf of the transferor, Mr Chen Guanzhan and Mr Wong Man-hoi, and two directors appointed or nominated on behalf of Tuenbo and Mr Cheung, namely Mr Cheung himself and his wife, Mrs Cheung.

4.On 16 June 2014, the transferor and the plaintiff executed an instrument of transfer and entered into a bought and sold note for the transfer of one share in the Company from the transferor to the plaintiff for valuable consideration.  Both documents were submitted to and stamped by the Stamp Office of the Inland Revenue Department.

5.On 26 June 2014, the documents for transfer having been submitted to the Company, the Company held a board meeting attended by all the directors and legal representatives.  At the meeting, Mr and Mrs Cheung raised certain queries relating to the ownership of the plaintiff and requested, as a condition for the approval for registration of the transfer of the one share, that the plaintiff issue a confirmation letter to confirm a number of matters.  That confirmation letter was duly prepared and signed and issued by the plaintiff on 30 June 2014.

6.On 7 July 2014, the solicitors firm of Messrs Wong, Hui & Co, who represented Mr and Mrs Cheung, confirmed that the documents appeared to be in order and that they had no further comments and requested that the plaintiff lodge the relevant documents with the Company’s secretary for further action.

7.On 11 July 2014, the plaintiff duly lodged the relevant documents with the Company’s secretary for the transfer to be registered. Notwithstanding this, the Company’s secretary did not take any step to effect the registration of the transfer.

8.About a year later, in June and July 2015, Tuenbo and Mr Cheung wrote to the plaintiff indicating that they would only procure the Company to register the transfer if the plaintiff acknowledged that the transferor and the plaintiff were to be treated as one single member of the Company for the purposes of the quorum requirement of the articles of association of the Company.

9.The plaintiff considered that there was no basis for Mr Cheung and Tuenbo to insist upon that condition and that, in any event, the demand had been made by them without the approval of the board of directors of the Company.

10.To date, no notice of refusal to register the transfer has been received by the transferor or the plaintiff.  But because of Mr Cheung and Mrs Cheung’s continuing refusal to sign any resolution to effect the registration of the transfer, the transfer of the one share effected in June 2014 has remained unregistered.

11.Clause 23 of Table A in the first schedule to the Companies Ordinance, Cap 32, which, with some exceptions, was incorporated as the articles of association of the Company, provides:

“Subject to such of the restrictions of these regulations as may be applicable, any member may transfer all or any its shares by instrument in writing in any usual or common form or any other form which the directors may approve.”

12.Clause 7 of the articles of association of the Company provides:

“The Directors may in their absolute discretion and without assigning any reason therefore, refuse to register a transfer of any share. If the Directors refused to register a transfer they shall within two months after the date on which the transfer was lodged with the Company, send to the transferee notice of the refusal as required by section 69 of the Ordinance.”

13.It follows that under the constitution of the Company, any member is entitled to transfer all or any of its shares by instrument in writing albeit subject to the discretion of the directors of the Company to refuse to register a transfer of share.  The transfer was, in fact, considered by the board of directors of the Company on 26 June 2014 and the only condition mentioned then for the approval of the registration of the transfer had been satisfied.

14.Furthermore, on the facts, there has, to date, been no proper refusal by the board of directors to register the transfer.  The right to refuse to register a transfer is vested in and must be exercised by the board of directors collectively.  It is a right that has to be actively exercised by a resolution of the board.  The mere failure to pass a proposed resolution for registration of a transfer is not a formal active exercise of the right to decline to register: see Re Hackney Pavilion Limited [1924] 1 Ch 276; Moodie v W& J Shepherd (Bookbinders) Limited [1949] 2 All ER 1044.  

15.The requirement of the Companies Ordinance, Cap 32, as referred to in the articles, is reproduced in section 151 of Companies Ordinance, Cap 622, pursuant to which a company must either register the transfer or send to the transferee and transferor the notice of refusal to register the transfer within two months.  That the Company has clearly failed to do.

16.In the circumstances, there being no valid refusal to register the transfer, the plaintiff has a right to have the transfer of share to it registered by the Company.  There will therefore be an order prayed for in paragraphs 1, 2, and 3 of the originating summons.

17.There will be an order for costs in favour of the plaintiff against the defendant - costs of the action with certificate for counsel.

Mr Kenny C P Lin, instructed by Simmons & Simmons, for the plaintiff

Mr Ricky Yu, of Ho & Wong, for the defendant