The German Swiss International School Association Ltd v. Horst Joachim Franz Geicke

HCMP 424/2020

[2020] HKCFI 2417

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 424 OF 2020

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Before: Hon Harris J in Chambers

Date of Hearing: 10 September 2020

Date of Delivery of Decision: 15 September 2020

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D E C I S I O N

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Application

1.On 26 June 2020 I handed down my decision in respect of the Company’s application for declarations that certain of its Articles of Association contravened the Race Discrimination Ordinance, Cap 602 (“Ordinance”) and were void: alternatively, one of them was void for uncertainty (“Decision”). I made the following order (“Order”):

“1. A Declaration that the underlined portions of the following provisions or conditions in Articles 47.2, 63 and 68 of the Articles of Association of the German Swiss International School Association Limited, namely:

Article 47.2

‘Any Member who is fluent in written and spoken German is eligible for election. Members with any commercial interest in the School and Members who are chairperson(s) or deputy chairperson(s) of Klassenpflegschaften shall not be eligible for election to the Board. For the avoidance of doubt, teachers and employees of the School shall not be eligible for election to the Board and shall not have any voting rights in Board meetings.’

Article 63

‘The meetings of the Board shall as a rule be conducted in German.’

Article 68

‘The Board shall elect from its members the Chairman, the First Deputy Chairman, the Second Deputy Chairman, all of whom must have a German speaking background, and the Treasurer, and should it deem necessary, the Deputy Treasurer.’

are void and unenforceable for being in breach of section 4(1)(b) and 36 of the Race Discrimination Ordinance, Cap 602 (‘the Ordinance’) and by virtue of Section 81 of the Ordinance and in the case of Article 68 also for uncertainty.”

2.The Respondent, Mr Geicke, now wishes to appeal the Order, but he did not do so in time (28 days).  He applied one week late for an extension of time to commence an appeal [1].

3.I will not repeat the details of the dispute as these are explained in my Decision.  In short, the principal issue was whether or not the Ordinance applies to the Articles of Association of the Company, which operates a school.  It was not in dispute that if the Ordinance does apply, the parts of the Articles underlined in my Order are discriminatory. Mr Geicke wishes to challenge my decision that the Ordinance applies to a school.  He does not wish to challenge my decision that the relevant parts of the Articles impermissibly discriminate on the grounds of race [2].  The Company opposes the application for an extension of time to commence an appeal.

Legal Principles

4.Order 59 rule 15 of the Rules of the High Court (“RHC”) gives the court a discretion to extend the time for appeal.  Put broadly the court determines such applications by considering all the relevant circumstances and determining whether the overall justice of the case requires the exercise of the discretion to extend time [3].  However, the courts have identified common characteristics of such applications from which principles can be derived to guide the court in the exercise of the discretion [4]. In summary they are:

(a)  The length of the delay.

(b)  The reasons for the delay.

(c)  The chances of the appeal succeeding if leave is given.

(d)  The degree of prejudice to each party depending on whether time is or is not, extended.

5.If the delay is short, arises from matters which are excusable and causes little prejudice to the respondent, the court is likely to grant an extension.  An example of an excusable delay would be a party falling seriously ill shortly after a decision is handed down and being unable to attend to the matter of an appeal.  Generally an excusable delay will be one arising from a matter that is not the responsibility of the party.  Consequently failure to act because of indecision is not, as Yuen JA states in Lui Kwong Wah v Kwan Po Ping [5], an acceptable reason.

6.If the court is of the view that the reason for the delay does not excuse the failure to commence an appeal within the material time period the party seeking the extension of time must show a real prospect of success on the merits and that is the case even if the delay is short [6].  The delay in the present case is short.  In my view although the appeal is arguable it does not seem to me that it can sensibly be suggested that it has a real prospect of success.  I did not understand Mr Chen to suggest otherwise.  In these circumstances it follows that the material issues for consideration are the reasons for the delay and the prejudice caused to the parties by whichever of the alternative decisions I reach.

Reasons for the Delay

7.Mr Geicke’s draft affidavits (they are unsworn because of difficulties he has making them as he is currently resident in Vietnam) are exhibited to affidavits made by his solicitor, Mr Hoy.  Mr Geicke does not suggest that he was unaware of the time for commencing an appeal. Mr Geicke is a sophisticated, well-resourced and legally represented businessman.  I proceed on the basis that he was aware that an appeal needed to be commenced within 28 days of my Order.  His reasons for not causing a notice of appeal to be issued within 28 days are as follows:

(a)  He was awaiting the outcome of the extraordinary general meeting (“EGM”), which took place on 6 July 2020 referred to in [7] & [24] of my Decision, but the results of which did not become available until 4 September 2020.

(b)  Difficulties in consulting the group of members, who requisitioned the EGM and with whom he is aligned.

(c)  Difficulties in consulting a representative of the German Government on whether or not to appeal.

I deal with each of these matters in turn.

8.At the EGM, 15 resolutions were put to members. Seven were special resolutions to amend the Articles.  The other eight resolutions concerned various matters including the removal of four board members.  One of the special resolutions, number 3, sought approval to the removal of those parts of Articles 47.2, 63 and 68 which, before me in June, the Company had contended were in contravention of the Ordinance. Mr Geicke was one of the requisitioners.  I am told that the requisitioners voted against special resolution 3, which like all the special resolutions except 2, which dealt with formal changes to the Articles, was not passed.  The ordinary resolutions were all passed except number 10.  Mr Geicke suggests that he was waiting to see if special resolution 3 had been passed before deciding whether to appeal, because if it had been passed this would have rendered an appeal pointless.  It seems to me that this does not excuse his failure to commence an appeal in time. Mr Geicke was one of the group lobbying for the resolution to be rejected.  He must be assumed to have understood that as a special resolution requires approval by 75% of members who vote, the prospect of it passing in the face of concerted opposition was limited as demonstrated by the result of the previous attempts to change the contentious Articles.  Indeed, this was, presumably, why the requisitioners caused it to be put to the members in general meeting in the first place.  Mr Geicke was also in a position to establish what was involved in commencing an appeal (very little in the present case as the draft notice of appeal demonstrates) and appreciate that little money would be wasted if an appeal were to be formally commenced and then withdrawn.  I shall return in more detail to the EGM and the resolutions in [14]–[17] in which I deal with the question of prejudice.

9.It seems to me that such difficulties as may have existed in establishing the views of other members who share Mr Geicke’s views and with whom he had been in contact prior to the EGM is also little excuse for not issuing a notice of appeal in time.  Mr Geicke is the sole respondent and it was for him to make the decision whether or not to appeal.  I can understand that he might have wanted to assess the sentiment of other members, but he had time to do this to the extent necessary to make the decision to issue a notice of appeal.

10.In my view the same is true of his decision to wait until he could speak to Mr Karsten Tietz the head of the Legal Department of the Federal Foreign Office of the German Government, who is based in Berlin.  Mr Tietz was the German Deputy Consul General in Hong Kong between 2015 and 2018 and he features in some of the evidence filed for the substantive hearing.  Mr Geicke says in [7(4)] of his draft 3^rd affidavit that he thought it important to consult the appropriate German Foreign Office before making a final decision to appeal; although he does not tell the court why he thought this.  An explanation for why Mr Geicke thought it important to consult Mr Tietz is relevant, because, as I explained at length in the Decision, the German Government have no relevant legal interest in the present dispute.

11.It does not seem to me that the matters relied on by Mr Geicke can be said to constitute a reasonable excuse for failing to commence the appeal in time.  Having reached this conclusion and also being of the view that the appeal does not have a real prospect of success, the principles that I have explained guide the court in the exercise of discretion under O59 suggest that the application should be dismissed.  However, there is in the present case another important consideration, which weighs in favour of dismissing the application, namely, the detriment to the interests of the Company and the community that it represents of granting an extension of time.

Prejudice

12.Mr Chen submitted that in assessing prejudice it is necessary to compare the position that the successful party was in immediately before time for appealing expired and at the time the application for an extension of time is made.  I disagree.  In my view the correct comparator is the position that the successful party, i.e. the prospective respondent to an appeal, was in immediately before the application for an extension was made and the position the successful party would be in if leave is granted.  As Lord Donaldson MR states in Norwich & Peterborough Building Society v Steed [7] “Once the time for appealing has elapsed, the respondent who was successful in the court below is entitled to regard the judgment in his favour as being final.  If he is to be deprived of this entitlement, it can only be on the basis of a discretionary balancing exercise, however blameless maybe the delay on the part of the would-be appellant”.  This balancing exercise involves a consideration of the consequence of depriving the successful party of the benefit that the judgment conveys.  In the case of, for example, an action for recovery of a debt it would be deprivation of the right to immediate payment.  The right to payment itself can always be secured if there is reason to think that the right to recovery may be lost altogether as a consequence of the delay resulting from an appeal and thus in such a case prejudice to the successful party may not be a weighty consideration.  However, the present case gives rise to materially different considerations.  In order to understand the reasons for this it is necessary to return to the genesis of the dispute and how it has developed.

13.The dispute has arisen because the Articles purport to restrict membership of the Board to German speakers.  I explain the background and the issues in detail in the Decision.  I summarise them here.  As the School has developed over the last three decades, the relative size of the English stream has grown to substantially exceed that of the German stream and local families represent a sizable proportion of the School demographic, possibly more than half.  An Article which restricts membership of the Board to German speakers results in local and other non-German speaking families not being represented on the Board.  As I have already noted it is not in dispute that these restrictions constitute impermissible race discrimination if the Ordinance applies to the Company.

14.Unsurprisingly the restriction on who could become a director has over time became a matter of concern within sections of the School community.  Attempts in 2019 to amend the Articles to delete the language restrictions were unsuccessful because of opposition of members such as Mr Geicke.  As a consequence, a complaint was made to the Equal Opportunities Commission concerning the lawfulness of the restrictions in the Articles.  It was agreed by the complainant and the Company that the issue was best resolved by this court.  The Company issued an originating summons for declarations substantially in the terms of the Order quoted in [1].  As evident from the terms of the declarations that were sought the Board did not dispute that the Articles were in contravention of the Ordinance.  In response a group of members who oppose the removal of the restrictions issued a requisition for an EGM at which members would be asked to vote on the resolutions that I have referred to earlier.  I was satisfied that with a view to trying to resolve what was showing signs of becoming an intractable and unpleasant dispute between members of the Company, I should determine the Company’s application for a declaration as to the lawfulness of the relevant Articles before the EGM.  An early date was fixed for a hearing.  Mr Geicke applied successfully to join as a party in order that he could make submissions in opposition.  I produced the Decision shortly after the hearing and before the EGM.

15.As matters transpired all the requisitions were put to the members in general meeting.  This was despite my Decision in which as well as determining whether the contentious Articles contravened the Ordinance I had also explained that a number of the resolutions that proposed amendments to the Articles were problematic.  For example, in [24] I explain that Resolution 3 purports to change the Article that deals with proxies in a manner, which would be unlawful.  It was not strictly necessary for me to deal with the proposed amendments in the Decision as not having been passed at the time they did not impact on the decision that I had to make.  I did so with a view to assisting the Company in avoiding yet more controversy.  Although I can understand that it might have been difficult to get all the requisitioners to agree to withdraw objectionable resolutions before the EGM it might have been expected that the requisitioners and members generally would have noted the Court’s opinion and voted against the resolutions, which I had explained in the June Decision would if passed result in Articles that were unlawful.  It is, however, clear from the result of the EGM with which I have been provided that this is not the case.  Although only the formal amendment to the Articles contained in Resolution 2 was passed more than 50% of members voted in favour of Resolution 3, which I had clearly explained was unlawful. Similarly, 49.34% of members who voted, voted in favour of Resolution 4, which purported to entrench the control of German speaking members by providing that the Chairperson, who has a casting vote at board meetings, was fluent in both spoken and written German.  In addition, it purported to put in place a process for ensuring that other board members consisted of half representatives of the English stream and the German stream and that members, who are alumni or parents could only vote for a director representing the stream with which they are associated.  This is despite it being explained in [8] of the Decision that such a provision would be in breach of s460 of the Companies Ordinance and void.

16.It is clear from the evidence that was filed for the purposes of this application that the disagreements that have arisen over the constitution of the Board have become increasingly bitter and unconstructive. The affidavit evidence goes into some detail concerning the conduct of the EGM and issues that have arisen concerning the voting.  It is not necessary to go into what makes for an unedifying read.  It will suffice to say that the evidence suggests that the atmosphere at the EGM and the interaction between different sections of the Company’s membership was antagonistic and unpleasant.

17.The evidence filed for the purposes of the present application describes a troubling deterioration in the Company’s governance. Four members of the Board were removed by ordinary resolutions passed at the EGM rendering the Board inquorate.  Some other directors have resigned or indicated that they wish to resign.  The evidence filed for the present application explains that the Board remains inquorate because the Board cannot find suitable eligible candidates, who are willing to be appointed given the fractious state of the School.  Presumably some members could be found, who might be willing to join the Board, but it is understandable that the Board wish to appoint individuals they feel they can work with constructively.  The present position is that the Board, and thus the Company, cannot initiate any action that requires a board resolution.

18.In the Decision I consciously avoided referring to some of the more inflammatory evidence as I took the view that it was not necessary and might make an already divisive situation worse.  This was particularly true in the case of evidence concerning the involvement of the German Consulate.  In dealing with the German Consulate’s involvement in the matter I limited myself to references to the German Consulate’s own documents, which they had given to Mr Geicke for use in the application.  I did not comment on affidavit evidence filed on behalf of the Company in which refers to things said by members of the German Consulate pertaining to the dispute.  However, exhibited to Mr Geicke’s 4^th draft affidavit are documents produced by Mr Teitz and Mr David Schmidt the current Deputy Consul General dealing with allegations made in the affidavits of Mr Müksch filed on behalf of the Company.  They reject the suggestion that the German Consulate has interfered in the affairs of the School or that it is supporting an objectionable discriminatory attempt to entrench control of the Board in the hands of representatives of the German speaking community.  However, neither Mr Teitz nor Mr Schmidt explain how their protestations that the German Consulate is not interfering in this matter can be reconciled with the German Consulate’s inappropriate approaches to the Equal Opportunity Commission and Tricor Services Limited (“Tricor”) described in [12], [15]–[19] & [20]–[24] of the Decision.  Neither do they explain how they reconcile rejection of the suggestion that the German Government supports a discriminatory practice with Mr Geicke’s evidence that the German Government supports his appeal the express purpose of which is to retain provisions in the Articles, which it is not disputed constitute impermissible discrimination on grounds of race under Hong Kong’s Race Discrimination Ordinance. Mr Geicke may have contested the Company’s application and decided to appeal the Decision in order to maintain some leverage in negotiating amendments to the Articles rather than to promote a consciously racist agenda.  However, the fact remains that by supporting both the application and the attempt to appeal the Decision the German Consulate gives the impression that it supports maintenance of a provision that is discriminatory and, if the Ordinance applies to the Company, is unlawful.  This impression has not been helped by Mr Teitz’s public support for the existing status quo.

19.Mr Müksch describes in his 3^rd affirmation a speech made by Mr Teitz at a Spring Reception at the Goethe Institute in early 2018.  The relevant parts of the evidence are as follows.

“- Mr Tietz starts his speech at about 19h35.

- He starts of by saying that times are not good in Hong Kong. He is commenting on President Xi and his cementation of power recently. He says that Xi went from being the Chairman of everything and every committee to the Chairman of everything for EVER.

- At the same time the Hong Kong people are being disinfranchised. They are loosing their political freedom and there is prosecution not only of those who want independence, but also of those who stand for democratic ideas. He says the German community and German business need to stand together.

- He goes to suddenly shift to GSIS and puts it at the same level as the situation in China and in Hong Kong.

- He explain that GSIS is not state run, nor receives any influence from the German state. It is run by the parents only. He states that it is a company. He states that it is not guaranteed that the school is German. He points out that this is the only REMAINING (clearly said that—VERBLEIBENDE) school, where there are more English students than German students. He says that maybe this is because the academic IB achievements of the English stream are so high. He says that this is a point of concern.

- Then he implies that the ‘Germaness’ of the school is in threat through the changes, through the articles revision and the power of the English stream. He encourages the Germans to stand together in these hard times, to be united and to defend the German values.

- He is disappointed that so few Germans stand for election at the Annual General Meeting on the 8^th March and encourages to vote only for Germans in the AGM.

- He says that we are in in a state of war, need to group together as Germans and defend ourselves. He uses war several time as a reference to the current situation.

- He points out how important the school is for the German community and industry.

- He encourages to give the proxies to Mr Brodhage, the Chairman of the German Chamber of Commerce (Mr Brodhage in his speech relativises that and says that in the first instance people should come to the AGM themselves).

- He recounts the story of a school that broke apart in the US, with similar problems.

- He urges everyone to go into the subcommittees and have more Germans in the board and the committees.

- He urges people to stand against any changes that are currently being implemented.

- He instrumentalises Desiree Jebsen, the Chairman of the Board of the GSIS Association and the GSIS Foundation Ltd. and implies that she is part of this initiative and political drive.  He thanks her and her husband Michael Jebsen from the famous Hong Kong tycoon family, for being here for the event and for supporting this event.”

20.Mr Teitz responds to this in a letter he has prepared dated 24 August 2020 commenting on Mr Müksch’s evidence exhibited to Mr Geicke’s draft 4^th affidavit.  In respect of the more inflammatory statements Mr Müksch attributes to Mr Teitz, Mr Teitz says this, and I quote:

“1. I never used the word ‘war’ in my speech at all as alleged.

2. My comments about President Xi have been completely taken out of context, since, in fact, I compared him to Chancellor Merkel, who many Germans feel is also in power ‘forever’.  The rest of the political remarks are also taken out of context, but the aforementioned are the most offensive.”

Mr Teitz does not appear to dispute the general thrust of Mr Müksch’s evidence.  Mr Teitz was not promoting a constructive dialogue between the various parts of the School’s community with a view to achieving board representation, which reflected the School’s changed demographic and the legitimate expectations of the majority of members.  Mr Teitz advocated an approach that encouraged the development of polarised position.

21.The Company operates a school.  During any period, and particularly in the present challenging environment, the level of dysfunction and animosity amongst the membership that I have described would be troubling. The prejudice to the Company and the School it operates of the continuation of the present dispute over the language and cultural restrictions contained in various of the Articles is obvious, considerable and threatens the Company’s ability to function.  The prejudice to Mr Geicke if I do not grant him leave to appeal is minimal [8]. He has no financial interest in the School.  He is not on the Board.  He apparently has children at the School, although I understand that he currently lives not in Hong Kong, but Vietnam.  He suggests that his motive in intervening is simply to ensure that the Company conducts its affairs in accordance with the Articles.  He expressly disavows the suggestion that he has intervened in order to try and maintain racially discriminatory provisions in the Articles of Association.  The Decision and the resulting declaration I have quoted in [1] establishes that non-German speaking members can be appointed to the Board and thus Mr Geicke’s concern that some members of the Board had been appointed in breach of the Articles has been resolved; unless, of course, contrary to his sworn testimony, he has all along been motivated by a desire to retain racially discriminatory provisions in the Articles of Association.

Conclusion

22.It is clear in my view that the prejudice to the Company of granting leave to appeal out of time is considerable and the prejudice to Mr Geicke of refusing leave minimal, if any.  As I have already explained Mr Geicke’s reasons for not appealing in time fall into the category that the authorities treat as inexcusable.  The appeal is not strong.  In conclusion applying the principles that guide the court in determining applications for leave to appeal out of time the application should be dismissed.  I will make a costs order nisi that Mr Geicke pay the Company’s costs of the application forthwith with a certificate for two counsel.

23.As the Company’s board is inquorate and the relationship between members has deteriorated to a point that calls into question the Company’s ability to operate the School lawfully I shall copy my June Decision and this decision to the Secretary for Justice as parens patriae of charities and the Secretary for Education.

Mr Abraham Chan SC and Mr Timothy Parker, instructed by P C Woo & Co, for the applicant

Mr David Chen, instructed by Robertson, for the respondent