Yeung Bing Kwong Kenneth v. Mount Oscar Ltd

CACV 26/2019

[2019] HKCA 688

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 26 OF 2019

(ON APPEAL FROM HCMP NO 773 OF 2018)

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Before: Hon Kwan VP, Yuen JA and Au JA in Court

Date of Hearing: 11 June 2019

Date of Judgment: 11 June 2019

Date of Reasons for Judgment and Decision on Costs: 26 June 2019

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REASONS FOR JUDGMENT
AND DECISION ON COSTS

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Hon Kwan VP (giving the Reasons for Judgment and Decision on Costs of the Court):

1.This appeal is brought by the applicant, Yeung Bing Kwong Kenneth, against the judgment of Ng J on 24 December 2018 ([2019] 1 HKLRD 572). The judge dismissed his originating summons for a declaration that the ordinary resolution passed at the Extraordinary General Meeting of the respondent company, Mount Oscar Ltd (“the Company”), on 9 March 2018 to remove him as a director is invalid or otherwise null and void, and for an injunction that the Company be restrained from implementing or otherwise acting upon the resolution.

2.On 4 March 2019, the judge ordered the applicant to pay the costs of the originating summons on an indemnity basis, including the costs of the hearing before Anthony Chan J on 12 June 2018 and the costs of the hearing on 4 March 2019, as the judge had taken the view that the originating summons is wholly unmeritorious and should never have been brought, and there is no legal basis whether statutory or otherwise in support of the application[1]. This costs order is also the subject of appeal, irrespective of the outcome of the appeal against the judgment.

3.At the conclusion of the hearing, we dismissed the appeal against the judgment and reserved our decision on the appeal against indemnity costs and the costs of the appeal.  These are the court’s reasons for judgment and the decision on costs.

This appeal and the applicant’s arguments

4.The question of law raised in this appeal is whether, as a matter of construction of sections 462 and 463 of the Companies Ordinance, Cap 622 (“the CO”), a director faced with a proposed resolution to remove him and who has the right to protest against his removal under these provisions is entitled to be provided with the reasons for his removal.  Whilst there are express provisions in section 463 that the affected director is entitled to be heard on the resolution at the meeting at which the resolution is voted on, and that he may make representations in writing to the company not exceeding a reasonable length, there is nothing in sections 462 or 463 which expressly provides for reasons to be given to this director.  It is the applicant’s contention that a requirement to give reasons should be read into these statutory provisions by necessary implication.

5.The applicant’s case was argued before the judge and on appeal solely on the basis of the asserted entitlement as a matter of statutory interpretation.  It was emphasised by Mr Ambrose Ho SC[2] on the applicant’s behalf that the court in this instance is not concerned with “making a decision that would suit the circumstances of an individual case”.  And it is “beside the point” whether the applicant will be subjected to a fresh proposed resolution to remove him, and whether a fresh resolution would be passed if all the statutory requirements had been complied with.

6.The arguments made before us are essentially the same as the arguments before the judge.  In essence, Mr Ho submitted that the director’s right to protest against his removal must carry with it the right to be informed of the reasons for his removal, so that his right to be heard and make representations can be exercised in a meaningful manner.  Otherwise, the director would be “boxing at shadows”.  The procedure concerning the director’s right to protest is not confined to private or family companies.  It has to be followed by companies irrespective of their size, the complexity of their structures, the volume of their business.  When members propose a resolution to dismiss a director, the director may have no inkling of the complaint and must not be left to guess what could be the reasons.

7.Closely associated with the director’s right to be heard and make representations is the right of the shareholders to be meaningfully informed before they decide how to cast their votes at the meeting.  The fact that it is for the shareholders to decide underscores the significance that the process of making representation is meant to be followed in a meaningful way to enhance good governance, instead of following the process to the letter in a manner that is open to abuse and would lead to defeat of its intent and purpose.

8.Last but not least, the statutory provisions should not be construed as taking away the fundamental principles of natural justice and/or audi alteram partem when there is nothing in the language or the context to compel such an interpretation.  The courts will lean against construing the statutory provisions as having the effect of overriding fundamental human rights unless clear language dictates otherwise.

The background

9.As there is no need to go into the facts, we will just mention briefly the background and adopt for this purpose the narrative in the judgment:

“6. The Company is a private limited company incorporated under the laws of Hong Kong. Its 2 registered shareholders are and at all material times were Yeung Chi Shing Estates Limited (“YCSEL”) holding 199 shares and Tim Yu Investment Company Limited (“Tim Yu”) holding 1 share as YCSEL’s nominee. In effect, the Company is beneficially owned by YCSEL solely.

7. Prior to the EGM, the Applicant was one of 4 directors of the Company. After his removal, the current board of directors consists of Yeung Ping Leung Howard (“Howard”), Yeung Ho Wai Ping (“Julia”) and Yeung Luk Pui Lan Agnes (“Agnes”).

8. On 26 January 2018, YCSEL, as the Company’s majority shareholder, requested the board of directors to call an EGM to consider the removal of the Applicant as a director and gave special notice of the proposed resolution to remove him as a director of the Company with immediate effect.

9. On 27 January 2018, the Company secretary, Ms Cheung Kit Man (“Ms Cheung”) issued a Notice of Directors’ Meeting to all directors of the Company to inter alia consider YCSEL’s aforesaid request to call an EGM and to give special notice of the proposed resolution to remove the Applicant as a director of the Company with immediate effect.

10. On 31 January 2018, the Company’s board of directors resolved to convene the proposed EGM. At that meeting, the Applicant questioned the reason behind the proposed resolution to remove him. He also asked Howard to state the grounds of removal, but none were given to him.

11. On 5 February 2018, Ms Cheung issued a Notice of EGM to be held on 9 March 2018 for the purpose of considering and, if thought fit, passing an ordinary resolution to remove the Applicant as the Company’s director with immediate effect.

12. On 8 February 2018, the Applicant issued an email to inter alia Howard, Julia, and Agnes and Howard on behalf of YCSEL in which the Applicantcomplained that he had not received the grounds of his removal as requested in his letter dated 1 February 2018 and requested for the grounds of removal immediately.

13. By a letter dated 26 February 2018 (“26 February Letter”) to Howard, Julia, and Agnes, YCSEL and Tim Yu, as well as Ms Cheung, the Applicant reiterated his complaint that the Company and Howard had failed to state the grounds of his removal despite his repeated requests. Nevertheless, the Applicant went on to set out his objections to the proposed removal of him as a director.

14. By a further letter dated 3 March 2018 (“3 March Letter”) to Howard, Julia, and Agnes, YCSEL and Tim Yu, as well as Ms Cheung entitled “My Section 463(3) Representation to the Notice of the Removal of Directorship”, the Applicantreiterated verbatim his representations set out in the 26 February Letter. The 26 February Letter and the 3 March Letter (“Written Representations”) were circulated to members of the Company.

15. At the EGM held on 9 March 2018:

(1) Ms Cheung confirmed that the Written Representations had been circulated to members of the Company.

(2) The Applicant queried why the reasons for his removal were not given, in response to which the Company’s legal adviser replied that the reasons for the removal of a director were not required to be provided by YCSEL or the Company under the CO.

(3) The Applicant read out a statement alleging illegality and irregularity of the proposal to remove him as a director of the Company under section 462(1) of CO.

(4) The resolution to remove the Applicant was duly passed as an ordinary resolution.”

10.Other than not providing the grounds of his removal to the applicant, all the express statutory requirements in the CO for removing the applicant as a director have been complied with.  The resolution to remove the applicant was passed unanimously by YCSEL (holding 199 shares) and Tim Yu (holding the remaining share as YCSEL’s nominee).

The statutory provisions

11.Sections 462 and 463 of the CO are derived from section 157B of the former Companies Ordinance, Cap 32.  When section 157B was first introduced in 1984, the right of shareholders to remove directors was to be exercised by way of a special resolution.  This was amended in 2003 to an ordinary resolution and remains the same in the current legislation. The old section 157B was based on section 184 of the Companies Act 1948 in the UK.  The current equivalent statutory provisions in the UK are sections 168 and 169 of the Companies Act 2006. 

12.The statutory power given to shareholders to remove directors from office have been on the statute books for over seventy years.  Mr Ho has referred us to relevant extracts in Palmer’s Company Law at §§8.1317 to 8.1318 and 8.1322 to 8.1325; Gower’s Principles of Modern Company Law (10^th ed) at §§14-49, 14-50, 14-52; and Gore-Browne on Companies (45^th ed) vol 1 at 13[19] to 13[21].  Mr Martin Kok for the Company referred us to Introduction to Company Law by Paul Davies (2^nd ed) at pp 17 and 125; and Company Directors: Duties, Liabilities and Remedies (3^rd ed) by Simon Mortimore QC at §§7.02 and 7.08.  The authors in these works on company law in the UK emphasized the importance of this statutory right given to shareholders, that special procedures must be followed in the exercise of this unfettered power, that the director is guaranteed certain protections, and that the object of the procedural restrictions is “to prevent a director from being deprived of an office of profit on a snap vote and without having had a full opportunity of stating the contrary case”^[3].  But none of the authors have suggested that the UK legislation should be construed as importing a requirement to give reasons for removal to the affected director by necessary implication.

13.There is no reported case in the UK in which this question of statutory interpretation was considered.  The only decided cases that the applicant’s legal team managed to find are the two cases they cited to the judge: Furber v Royal New South Wales Canine Council Ltd, Case No 20416/98 (unrep), Supreme Court of New South Wales, Kirby J, 22 December 1998; and Johannes Jacobus Pretorius & Anr v Steven Edward Timcke & Ors, Case No 15479/14, High Court of South Africa, Salie-Hlophe J, 2 June 2015.  They were discussed at some length by the judge and we will return to these cases.

14.The relevant parts of sections 462 and 463 provide as follows:

“462. Resolution to remove director

(1) A company may by an ordinary resolution passed at a general meeting remove a director before the end of the director’s term of office, despite anything in its articles or in any agreement between it and the director.

…

(3) Subsections (4), (5), (6), (7) and (8) apply in relation to a removal of a director by resolution, irrespective of whether the removal by resolution is under subsection (1) or otherwise.

(4) Special notice is required of a resolution –

(a) to remove a director; or

(b) to appoint somebody in place of a director so removed at the meeting at which the director is removed.

…

(9) This section is not to be regarded as depriving a person of compensation or damages payable to the person in respect of the termination of –

(a) the person’s appointment as director; or

(b) any appointment terminating with that as director.

463. Director’s right to protest against removal

(1) On receipt of notice of a resolution under section 462(4) to remove a director, the company must forthwith send a copy of the notice to the director concerned.

(2) The director (whether or not a member of the company) is entitled to be heard on the resolution at the meeting at which the resolution is voted on.

(3) If notice is given of a resolution under section 462(4) to remove a director, the director –

(a) may make with respect to the resolution representations in writing to the company (not exceeding a reasonable length); and

(b) may request the company to comply with the requirement specified in subsection (4) in relation to the representations.

(4) The requirement specified for the purposes of subsection (3)(b) is –

(a) if the company receives the representations on a date that is more than 2 days before the last day on which notice may be given under section 571(1) to call the meeting, the requirement –

i.  to state, in every notice of the meeting given to the members, that the representations have been made; and

ii.  to send a copy of the representations to every member to whom a notice of the meeting is or has been given; or

(b)  if the company has not sent a copy of the representations to every member to whom a notice of the meeting is or has been given, the requirement to ensure that the representations are read out at the meeting.

(5)  Unless exempted by an order under subsection (6), the company must comply with a request made under subsection(3)(b).

(6)  On application by the company or by anyone who claims to be aggrieved, the Court may order that the company is exempted from complying with the request, if it is satisfied that the person who has made representations and made a requirement under subsection (3) –

(a)  has abused the right to do so; or

(b)  has used such a right to secure needless publicity for defamatory matter.

(7)  If the company contravenes subsection (5), the resolution passed under section 462(1) is void even though section 562(1) is complied with.”

15.In construing the above provisions, Mr Ho emphasized the significance of these features and stipulations in the statutory scheme:

(1)  Section 462 confers an important power on shareholders which would have the effect of permitting them to interfere with managerial activities normally vested with the directors. To balance the tension which may arise, the shareholders must follow closely a set of statutory procedure when they seek to exercise their right to remove directors.

(2)  This procedure requires the giving of special notice.  The proposer of the resolution must give not less than 28 days’ notice to the company before the meeting and the company is required to give notice of the resolution to members at the same time if practicable, or at least 14 days before the meeting if not practicable (section 578).  On receipt of the notice of the intended resolution, the company must send a copy to the director concerned, who has the right to make representations and have them notified to the members, and if this is not done, the representations are to be read out at the meeting.

(3)  This procedure is designed to protect the director, and strict compliance is necessary.  Section 462(3) makes it clear that the special notice procedure has to be followed where the director is proposed to be removed by a resolution of members, whether this is pursuant to section 462(1) or otherwise.  The word “must” is used in sections 463(1) and (5). Section 463(7) renders void a resolution for non-compliance with a director’s request made under section 463(3)(b).

(4)  The process of members’ written resolutions as an alternative to calling a general meeting, granted by sections 548 to 561, does not apply to the removal of directors before the end of the director’s term of office and hence does not apply to the removal of directors under section 462.  This is to ensure that the procedural safeguard of the director’s right to be heard on the resolution at the meeting at which it is voted on will not be compromised.

(5)  Even in a one-member company, the shareholder is obliged to ensure that all the formalities regarding the resolution to remove a director are fulfilled, and the mere intention of the single shareholder is not sufficient (Sheahan v Londish [2010] NSWCA 270 at §§97, 115, 214).

The principles of statutory interpretation

16.Mr Ho reminded the court of well-known principles in statutory interpretation as set out by Ma CJ in Town Planning Board v Town Planning Appeal Board (2017) 20 HKCFAR 196 at §29[4]:

“No issue arises between the parties as to the applicable principles regarding the construction of statutes. They are well known and I need not refer to them in any detail save to emphasise the following for the purposes of the present case:

(1) In construing statutory provisions, the court does not merely look at the relevant words. It construes the relevant words having regard to their context and purpose.

(2) The context of the relevant statutory provision should be taken in its widest sense and will of course include the other provisions of the statute. It may also be relevant in any given case to look at the history of the relevant provisions.

(3) Ascertaining the purpose of the statutory provision is obviously relevant, not only to help provide the relevant context, but to give meaning to the words used. In this latter respect, it is to be observed that often the meaning of words by themselves will not be clear unless regard is paid to context and purpose. Words have to be construed but they must not be construed in a vacuum.

(4) In ascertaining the purpose of a statutory provision, the court adopts a flexible and open‑minded approach.  The purpose may be clear from the provision itself or it may be necessary to look at the Explanatory Memorandum to the bill introducing the provision or a ministerial or official statement may be utilised for this purpose.”

17.Mr Ho also invoked the principle relating to the question whether a statute is to be construed as having overridden some basic tenet of the common law, such as the principles of natural justice.  This has been explained by Lord Hoffmann in R (Morgan Grenfell & Co Ltd) v Special Commissioner of Income Tax [2003] 1 AC 563 at §8 as follows:

“…the courts will ordinarily construe general words in a statute, although literally capable of having some startling or unreasonable consequence, such as overriding fundamental human rights, as not having been intended to do so. An intention to override such rights must be expressly stated or appear by necessary implication. The speeches of Lord Steyn and myself in R v Secretary of State for the Home Department, Ex p Simms [2000] 2 AC 115 contain some discussion of this principle and its constitutional justification in the context of human rights. But the wider principle itself is hardly new. …”

18.There is yet another principle which is of relevance.  Whilst Mr Ho has not relied on this particularly, we do not understand him to have disputed it.  This relates to the test for necessary implication in construing a statutory provision and was explained by Lord Hobhouse of Woodborough in R (Morgan Grenfell & Co Ltd) at §45:

“… A necessary implication is not the same as a reasonable implication as was pointed out by Lord Hutton in B (A Minor) v Director of Public Prosecutions [2000] 2 AC 428, 481. A necessary implication is one which necessarily follows from the express provisions of the statute construed in their context. It distinguishes between what it would have been sensible or reasonable for Parliament to have included or what Parliament would, if it had thought about it, probably have included and what it is clear that the express language of the statute shows that the statute must have included. A necessary implication is a matter of express language and logic not interpretation.”

19.The principles in R (Morgan Grenfell & Co Ltd) have been applied by Hartmann J in Pang Yiu Hung Robert v Commissioner of Police & Anr [2003] 2HKLRD 125 at §§82 to 85, and were quoted by the judge in §26 of the judgment.

20.The judge is of the view that the applicant has not even come close to reaching the high threshold required for including the additional requirement of giving reasons for his removal by way of necessary implication under the CO[5].

Discussion

21.What is the context and purpose of sections 462 and 463?  One starts not with the director’s right to protest against removal but with the nature of the right granted to the shareholders in the first place.  The statutory right of dismissal of directors by ordinary resolution notwithstanding anything in the articles of association or in any agreement between the company and the director is a “very strong provision” (Gower’s Principles of Modern Company Law at §14-49).  It enables the shareholders to assert themselves against the directors if need be by a simple majority and makes it clear that the ultimate control is in the hands of the proprietors of the company.  Even assuming a director may be entitled to petition for a just and equitable winding up on the principles of Re Westbourne Galleries [1972] 2 WLR 1289, this does not prevent his being dismissed from the board by a resolution within the statutory provision (Palmer’s Company Law at §§8.1317 and 8.1318; Gore-Browne on Companies vol 1 at 13[19]).

22.This power given to the shareholders is unfettered and may be used for a number of aims.  It allows shareholders to remove directors who are performing poorly, as well as those acting competently and within their powers but in a way that may be contrary to the wishes of the shareholders.  This is an apparently “tough mandatory rule” that allows the shareholders by ordinary resolution at any time to remove any or all of the directors from office without having to assign a reason for so doing (Company Directors: Duties, Liabilities and Remedies (3^rd ed) by Simon Mortimore QC at §§7.02; Introduction to Company Law by Paul Davies at p 17 and 125).  There is simply no requirement that the power to remove a director must be exercised for cause.

23.Closely related to the above is the elementary principle of law that the court will not interfere with the internal management of companies acting within their powers and in fact has no jurisdiction to do so (Burland v Earle [1902] AC 83 at 93; Kwok Ping Sheung Walter v Sun Hing Kai Properties Ltd [2009] 2 HKLRD 11 at §§19 to 20).  Further, the court holds fast to the rule not to interfere for the purpose of forcing companies to conduct their business according to the strictest rules, where the irregularity complained of can be set right at any moment (Browne v La Trinidad (1887) 37 Ch D 1 at 17).  Hence, the court had refused to grant an interlocutory injunction to restrain a company from acting on a resolution to remove a director on the ground that the resolution was a nullity due to irregularities, as the irregularities could be cured by going through the proper processes and the ultimate result would be the same (Bentley-Stevens v Jones [1974] 1 WLR 638).

24.Mr Ho sought to invoke the principles of natural justice and cited the decision of Lok J in Re Kam Lan Koon [2015] 5 HKLRD 79 at §§86, 119 to 130 as an illustration that such principles are applicable in a company law context.  But the extent of what fairness demands is dependent on the context of each case (Asia Television Ltd v Communications Authority (No 2) [2013] 3 HKLRD 618 at §54(6)).  As pointed out by the Court of Appeal on appeal from Lok J’s decision (CACV 191 & 192 of 2016, 28 July 2017, §32), the resolution sought to be impugned in that case was for the expulsion of certain members.  It was not merely a matter of internal management or procedural irregularity at meetings.  Membership is a core personal right of a shareholder and redress is provided in section 633 of the Companies Ordinance for rectification of the register of members if a member is wrongfully removed. The internal management rule only applies to irregularities which the majority has the power to ratify, and it is trite that the majority cannot lawfully expel members who are in the minority.

25.The decision of Lok J does not support the proposition that the principles of natural justice should be applied in the present context. Given that a director may be removed by this statutory power without cause, we do not think it apposite to invoke the principle of construction in respect of overriding fundamental principles of natural justice and/or audi alteram partem.

26.As mentioned earlier, the procedural protection given by the legislature to directors is “to prevent a director from being deprived of an office of profit on a snap vote and without having had a full opportunity of stating the contrary case”.  If it is indeed the legislative intent to give directors the further protection of providing reasons for dismissal to them whilst stipulating that the affected director “is entitled to be heard on the resolution at the meeting at which the resolution is voted on”, this could easily have been written in the statute.  We are inclined to think that the omission to provide for this (notwithstanding the elaborate procedure already provided) is due to the balance struck by the legislature between the interests of the shareholders and the director affected, and the view taken that the protection given in section 463 is sufficient and workable.

27.Much was made by Mr Ho that if the reasons for removal are not provided, the affected director would be boxing at shadows and unable to exercise his entitlement to make representation in a meaningful manner, and that the right of shareholders to make an informed decision is also engaged.  But the statutory right of removal is exercisable without cause, so long as there is a simple majority of shareholders to vote in favour of the resolution.  It may be reasonable and desirable for the affected director for reasons to be provided, but that is not the test for importing this requirement in the legislation by necessary implication.

28.As for the right of shareholders to make an informed decision, we agree with the judge this is an artificial argument.  The right of shareholders to make informed decisions would not be engaged if there is a sole beneficial shareholder (as in the present case), or where the resolution is put forward by the majority shareholders who have decided to vote in favour of it[6]. And if the resolution is proposed by a minority, it is unlikely that the reasons for removal would not be made known to the majority of shareholders who would need to be persuaded to vote in favour.

29.The judge has pointed out the difficulty that may arise where the duty to furnish reasons is sought to be imposed on the proposer of the resolution by implication (as it is entirely conceivable that the company may not know the reason for the resolution to remove a director).  We agree with him where a shareholder may, but is not obliged to, include the text of the proposed resolution in the request to call a general meeting (pursuant to section 566(3)(b) of CO), it cannot be said to be clear the express statutory language shows that the additional requirement of stating the reasons for the resolution must be included[7].

30.There are other uncertainties arising from implying an obligation to give reasons to the director.  How is it to be implied when the reasons should be given to the director?  Should it be implied that the reasons for removal should also be given to the shareholders, and if so, when?  What if the shareholders seek to remove a director without cause?  Would “no cause” be treated as “reasons” for this purpose?  It is difficult to see how these amorphous implications could be fitted into the existing statutory scheme, applying the test of necessary implication.

31.Lastly, we turn to the only two cases cited in support of the applicant’s proposition, Furber v Royal New South Wales Canine Council Ltd and Johannes Jacobus Pretorius & Anr v Steven Edward Timcke & Ors.

32.We agree with the judge’s detailed analysis of these cases[8].

33.As the judge has observed, the context and focus of discussion in Furber was the directors’ duty to inform the members of the reasons for the proposed resolution to remove a director, and this is independent of the obligation of the company or its board to inform the affected director of the reasons for dismissal.  The particular passage relied on by the applicant in Section 11 of the judgment was headed “An explanation by the Board to Shareholders”.  Of the four reasons given by Kirby J why the directors were obliged in the circumstances of that case to provide information to fully and fairly inform members of the reasons, only the fourth relates to the affected director’s right to be informed. Kirby J stated that the fourth reason “reinforces” the view he had formed, and he acknowledged “it is less than clear cut”.

34.As for Johannes Jacobus Pretorius, the judge’s construction of sections 71(1) and (2) of the Companies Act, Act 71 of 2008 (which deal with the removal of a director by ordinary resolution of members) was influenced to some extent by sections 71(3) and (4) (which provide for the removal of a director by board resolution on determining him to be ineligible or disqualified, incapacitated, or negligent or derelict, and expressly requires the board to give the director concerned a statement setting out reasons for the resolution, with sufficient specificity to reasonably permit the director to prepare and present a response, and a reasonable opportunity to make a presentation) (see paras [8] and [10]).

35.More pertinently, there was no discussion in either of these cases how the obligation to give reasons to the affected director or the principles of natural justice could be read into the legislation in Australia and South Africa by necessary implication or how the high threshold required by the test of necessary implication could be met.  We agree with the judge that these cases do not assist the present discussion.

36.For the above reasons, the applicant’s appeal must be dismissed.

Appeal against decision on costs and decision on costs

37.We are mindful of these principles: costs are in the discretion of the judge; a costs order may only be interfered with on appeal on the established principles governing an appeal against the exercise of discretion; the discretion to award indemnity costs is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’.

38.The judge awarded indemnity costs because he took the view that these proceedings are so unmeritorious and utterly devoid of merits that they should never have been brought.  Having heard the arguments advanced for the applicant, which are basically the same as those before the judge, we differ from the judge in his assessment that the arguments advanced for the applicant are so plainly unmeritorious that the applicant should be visited with indemnity costs.

39.Whilst the judge is correct in holding that there is no legal basis whether statutory or otherwise in support of this application, the arguments put forward do require some consideration how the statutory provisions should be construed in the relevant context and the applicant had cited two cases which may appear to provide some support for his contention.  He sought to argue his case, not on the facts, but as a matter of principle, no doubt recognizing that it may well be an academic exercise even if his statutory construction were to be upheld, as the resolution to remove him was proposed by the single beneficial shareholder of the Company and there is no indication that the shareholder would change its mind.  We do not think there is an abuse of process in this situation.  He should not be penalized with indemnity costs.

40.We set aside the order for indemnity costs by the judge and replace it with an order that the applicant should pay all the costs of the Company in the court below on a party and party basis.

41.For the costs of this appeal, we make a similar order that the applicant should pay the Company’s costs, on a party and party basis.

Mr Ambrose Ho SC, Mr Joseph Vaughan and Ms Wendy W Y Yeung, instructed by Pang, Wan & Choi, for the Applicant (Appellant)

Mr Martin Kok, instructed by Myra Li & Co, for the Respondent (Respondent)