Chen Pei Xiong v. Convoy Global Holdings Ltd and Others
Read the full judgment text of HCMP 2178/2020 on BabelCite. This High Court CFI judgment was delivered on 8 April 2021.
1. If there were a prize to be awarded to the application most riddled with grave errors and egregious abuse, the ex parte interlocutory injunction application made in this case might well win it.
Cited by 4 cases · Cites 10 cases
|
HCMP 2178/2020 [2021] HKCFI 836 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 2178 OF 2020 ________________________
________________________ BETWEEN
________________________
________________________ REASONS FOR DECISION ________________________ A. Introduction 1.If there were a prize to be awarded to the application most riddled with grave errors and egregious abuse, the ex parte interlocutory injunction application made in this case might well win it. 2.These proceedings were commenced on 25 November 2020 by the petitioner (“Chen”), who claims to be the holder of an aggregate 7.47% of the shares in the 1st respondent company (“Convoy”). The 2nd to 12th respondents (“Directors”) are executive directors, a non-executive director and independent non-executive directors respectively of Convoy. The 13th to 15th respondents (respectively “Eagle Legacy”, “Oceana Glory” and “Zhu”) are other shareholders. In the petition, Chen alleges that the affairs of Convoy have been conducted in an unfairly prejudicial manner throughout a series of mis-management. One of the complaints was the failure to have held an AGM. 3.Subsequently, on 18 February 2021, an AGM was called to be held at 5pm on 18 March 2021. Minutes before the start of the AGM, Chen made an ex parte application seeking ‘urgent’ interlocutory injunctive relief. Whilst the primary relief sought was apparently refused (see below), DHCJ MK Liu granted an ‘interim interim’ injunction (“ex parte Order”) that Convoy be restrained from holding the AGM on 18 March 2021 until the return date of 26 March 2021 or further order from the Court. By the time the ex parte Order was made, the AGM had started and was in fact well underway, and had nearly concluded. 4.At the return date on 26 March 2021, I had no hesitation in discharging the ex parte Order and in dismissing Chen’s inter partes Summons, with costs on the indemnity basis, with certificate for three Counsel. 5.Despite the valiant efforts of Mr Paul Shieh SC, leading Mr Gary CC Lam and Mr James Man (for Chen), I did not need to call on either Mr William Wong SC, leading Mr Lai Chun Ho (for Convoy) or Mr José Maurellet SC, leading Mr Jason Yu and Ms Jasmine Cheung (for the Directors). Of course, I had the benefit of skeleton arguments filed before the hearing. 6.Eagle Legacy, Oceana Glory and Zhu took no part in the applications. 7.Because of what follows, it is appropriate that I point out at once that neither Mr Paul Shieh SC nor Mr James Man were involved at the ex parte stage. Only Mr Gary Lam and the solicitors instructing him, So, Leung and Associates (“SLA”), were involved at the ex parte stage. 8.At the end of the hearing, I said I would hand down my reasons for my decision later. These are my Reasons for Decision. B. Further Background 9.The following background is relevant. 10.Convoy is a Cayman Islands company, formerly listed on the Main Board of the Hong Kong Stock Exchange. As already noted, Chen says he is the holder of an aggregate 7.47% of its shares. However, he is not a registered member of Convoy. 11.On 7 December 2017, the trading of Convoy’s shares was suddenly suspended. Trading has never resumed. In a Delisting Decision dated 26 May 2020, the Listing Committee of the Hong Kong Stock Exchange decided to delist the shares. A review of the Delisting Decision was scheduled to be heard on 30 March 2021. 12.In the meantime, Convoy has been the subject of serial litigation. 13.In HCA 2922/2017 (“Main Action”), Convoy and two other group companies as plaintiffs allege that certain shares allotted by Convoy in October 2015 were void or voidable. Of the over 40 defendants in the Main Action, Chen is named as one the defendants whose alleged shareholding is said to be void or voidable. Kwok Hiu Kwan (“Kwok”) is named as another defendant in the same category. Chen is suspected by Convoy of having acted in concert with Kwok in acquiring tainted Convoy shares. 14.An EGM requisitioned by Kwok took place on 29 December 2017 (“2017 EGM”). Kwok gave his proxies for the 2017 EGM which were accepted by Convoy and counted as part of the quorum of that meeting. But, following an objection to Kwok’s voting right, citing the legal actions against him showing Kwok’s shares were “problematic”, the Chairman of the meeting (“Johnny Chen”) relied on Article 74 of Convoy’s Articles to decide to exclude all of Kwok’s votes in respect of his 4,468,182,000 shares cast in that meeting. 15.On 11 January 2018, Kwok commenced HCMP 41/2018 to set aside Johnny Chen’s decision made in the 2017 EGM and to have his 4,468,182,000 votes counted. Harris J dismissed Kwok’s application for a declaration that Johnny Chen’s decision was unlawful, void and of no legal effect. He held that (1) the EGM chairman has the power under Article 74, in the meeting, to rule on a substantive objection to a registered member’s voting right and make a decision to disallow his votes; (2) the EGM chairman’s decision under Article 74 is final and conclusive; (3) so that the decision can be subsequently overturned in a court of law only if it is proved that the chairman made the decision in bad faith, that is, dishonestly, or for ulterior motive; (4) otherwise, the chairman’s decision once made cannot be subsequently overturned in a court of law even if it was wrong as a matter of law, irrational, or Wednesbury unreasonable. 16.By a further decision of Harris J given on 20 March 2020 after trial, Harris J rejected any allegation that Johnny Chen’s decision was made in bad faith, and declined to imply a term to include qualifications to the operation of Article 74 as put forward by Kwok. By its decision of 28 November 2020, the Court of Appeal dismissed Kwok’s appeal from that decision. 17.In actions numbered HCA 1479/2018 and HCA 1619/2018, Wang Pengying (“Madam Wang”) commenced two common law derivative actions against Convoy and two of its wholly-owned subsidiaries. By my Judgment dated 17 December 2019 [2019] HKCFI 3074, I ordered both actions to be struck out. Madam Wang is alleged by Convoy to be implicated in the same fraud as Kwok. 18.On 28 September 2020, Kwok again requisitioned for an EGM to be convened by Convoy for the purpose of reconstituting the Board. On 18 October 2020, Convoy issued a Notice (signed off by Johnny Chen) that the 2020 EGM would be convened on 26 November 2020. But Convoy ignored Kwok’s requested confirmation of his asserted right to have the votes of his shares counted. 19.On 21 October 2020, Kwok issued a Summons in HCMP 1578/2020 seeking a quia timet injunction, on the basis that in light of what happened in the 2017 EGM and Convoy’s reaction in seeking to strike out that action, it was clear that Convoy maintained its position that Kwok is not entitled to vote his shares in Convoy, and it would again disregard his rights as a shareholder in the 2020 EGM. I dismissed that application in my Judgment [2020] HKCFI 2874, given on 13 November 2020 (“my November 2020 Judgment”). 20.On 9 November 2020, a common law derivative action in HCA 1897/2020 was issued by Yang Zhi Jun (“Yang”). Amongst other things, Yang’s claim raises similar disputes as the claim struck out by me in the common law derivative actions brought by Madam Wang. Yang acquired his Convoy shares close in time to Kwok and Chen and is another suspected privy of Kwok. 21.On 23 November 2020, Kwok commenced proceedings in HCMP 2151/2020 seeking leave to commence a statutory derivative action to claim in the name of Convoy against various directors and former directors of Convoy. I later refused leave in my Judgment dated 31 March 2021, [2021] HKCFI 814. 22.On 25 November 2020, Chen issued the petition in the current proceedings HCMP 2178/2020 (“Petition”), alleging unfairly prejudicial conduct. 23.By summons dated 13 January 2021, the Directors applied to strike out the Petition. The grounds for striking out put forward by the Directors include (but are not limited to) that Chen has no locus standi to bring the Petition because he is not a registered member of Convoy, a fact deposed to in the supporting affirmation. On 26 January 2021, I gave directions by consent as to a timetable for filing evidence and for the hearing of the strike out application to be fixed before me for substantive argument, with one full day reserved. 24.On 7 January 2021, the 2020 EGM, originally intended to have taken place in November 2020, was held. On that day, Chen had caused advertisements to be published in four newspapers in Hong Kong urging shareholders of Convoy congregate at a different venue than the EGM venue, if the adjourned 2020 EGM could not proceed successfully or the shareholders could not enter Convoy’s venue for the meeting. Convoy published an announcement on the same day clarifying that its venue was the only proper venue for the adjourned 2020 EGM. At the EGM, the chairman of the EGM made a decision under Article 74 that Chen’s shares were ineligible to be counted. 25.On 17 March 2021, two EGMs were held, one of which was requisitioned by Kwok for the removal of the incumbent Board and the appointment of seven other directors. The other EGM held immediately after was to consider the re-appointment of all existing directors to the Convoy Board. The results of the EGMs were that the proposed directors put forward by Kwok were not elected, and the incumbent Board members were appointed as directors. 26.Earlier, on 17 February 2021, notice had been given that an AGM of Convoy would be held at 5pm on 18 March 2021, for consideration and possible approval of the recently published audited accounts for 2017, 2018 and 2019. 27.Therefore, from at least 18 February 2021, it was well known that the AGM would be held four weeks later on 18 March 2021, and the day after the date fixed for the two EGMs. C. Ex Parte Application 28.Despite those four weeks’ notice, the ex parte application was made only on the afternoon of the AGM itself, and the hearing of the application began at 4:48pm – just 12 minutes before the scheduled commencement of the AGM at 5pm. 29.I have not seen any actual ex parte summons, but the terms of the application can be seen from the draft order presented to the Deputy Judge. What was apparently sought by the draft were orders that:
30.As can be noted from below, however, Mr Lam’s skeleton argument did not precisely mirror these points. 31.The ex parte application was apparently supported by the draft 2nd affirmation of Wong Shui Ki Keith (“Mr Wong”) and the draft affidavit of Chow Hin Ting Leonard Ignatius (“Mr Chow”). Neither was affirmed or sworn until the following day, 19 March 2021. 32.Mr Wong is one of Chen’s solicitors at SLA. Despite the ‘boiler-plate’ introduction, his draft affirmation did not actually depose to any facts at all. Rather, it simply produced – as exhibit ‘WSKK-2’ – “copies of the relevant documents in support of the ex-parte injunction application”. No further description of the documents was provided, nor was any reason given as to why they might be relevant. The front sheet of the exhibit itself unhelpfully described the content of the exhibit simply as:
33.Even after the affirmation was actually affirmed, that way of producing exhibits was tantamount to simply waving a bunch of papers in front of the court. 34.The first 31 pages of the exhibit comprised a copy of the Petition (contrary to the well-known practice not to produce as exhibits to affirmations documents such as pleadings in the same case which are already on the court file). The remaining pages comprised only (a) a letter dated 14 January 2021 from Chen’s solicitors to Convoy complaining that his votes were said to be not qualified to be counted at the EGM on 7 January 2021, (b) Convoy’s public announcement that the Listing Review Committee Hearing would be heard on 30 March 2021, and (c) Convoy’s two announcements of the Poll Results of the two EGMs held on 17 March 2021. 35.For the avoidance of doubt, I would point out that Mr Chow’s draft affidavit also made no direct reference to the documents exhibited to Mr Wong’s draft affirmation (except the 14 January 2021 letter, mentioned in his ‘statement’ – see below). 36.Mr Chow is a barrister. His draft affidavit was five pages long. In it, he says he was instructed by SLA to appear on behalf of Chen as his proxy, to make a ‘statement’ for and on his behalf, and vote for and on his behalf at the EGM on 17 March 2021. Most of the draft affidavit recites in Punti (and in English translation) the statement which Mr Chow made to the EGM at around 6:10pm. The English translation reads as follows:
37.As to the votes of other shareholders, Mr Chow’s statement in English translation reads as follows:
38.Important for present purposes was the clear statement made by Mr Chow about the disqualification of Chen’s votes from being counted at the EGM on 7 January 2021, and the comparison with the unfair counting of the votes of others. Even ignoring the previous events about not counting Kwok’s shares, and Kwok’s failed attempts to seek recourse from the courts (about which Chen must reasonably be taken to have knowledge), there can be no dispute that by 7 January 2021 at the latest Chen and those advising him knew full well the stance of the Board as to whether his shares would likely be counted for voting, and the reason why they would likely not. 39.Mr Lam provided a three-page skeleton argument. In it, the urgency was described as “because of what happened yesterday at the EGM … and what will be happening at 5 PM today, that is, the AGM”. The order sought, and the alternatives, were set out. The primary application was identified as being for an order that Convoy “be restrained from counting the votes of the shares held by the 13th-15th Respondents at the AGM to be held at 5pm on 18 March 2021”. The first alternative was that Convoy “be restrained from convening and proceeding with the AMG [sic] to be held at 5pm on 18 March 2021”. The further alternative was that there be “an interim interim injunction restraining the Company from holding the AGM until an early date (say within 7 days) with filing directions”. 40.It can be noted that all those formulations identified that the person or body sought to be restrained was Convoy (in contrast to the letters purportedly giving notice of the hearing – see below). 41.The skeleton argument identified the issue before the court as being whether the board of Convoy will exercise its power under Article 74 in bad faith in discounting the votes of Chen. Chen’s answer to the question was given that from the EGM on 17 March 2021, Convoy will do so in bad faith (as it did at the EGM) in the coming AGM. For the hearing, the court was asked to read only two items, being: (1) my November 2020 Judgment §§75, 88-97, 108-112; and (2) the “affirmation of [ ]” (sic). (In light of that description of the evidence, it may be no surprise that the Deputy Judge had not read any affirmation before the hearing began – see below.) 42.What was stated at §111 of my November 2020 Judgment was said to constitute the foundation of the application. The submission was made that, as a result of what happened at the EGM the day before, there was a strong basis for inferring bad faith, or at least a serious issue to be tried. 43.Against these submissions, it is worth bearing in mind that: (a) whilst Chen was complaining about his votes not being counted at the EGM, he was not making any direct court challenge to the exclusion of his votes (and still has not done so); (b) instead, and without the direct challenge, he was inviting an inference or finding to be made that the decision not to count his votes – which, incidentally was a decision made by the Chairman of the AGM, not by the Board or any director acting as such – was a decision made in bad faith; and (c) Chen was then seeking to leverage on that invited inference or finding so as to invite a further indirect inference that bad faith would be used to exclude Chen’s votes from being counted at the AGM. 44.The alternative approach to granting the primary relief was identified as follows:
45.That alternative approach seemed to be inviting Convoy and the Directors to explain why bad faith had not been shown at the EGM before the AGM might be permitted to go ahead. Even ignoring the proper context, to which I will return, that can be described as at least somewhat unusual submission. 46.Albeit that the documentation provided to the Deputy Judge was extremely limited, it must have taken at least some time to have produced it (even in the mechanical time for typing). None of that time was used to give any form of real notice to Convoy or any of the Directors or any of their known legal representatives of the intended application for injunctive relief. 47.Instead, but only very shortly before the ex parte hearing, letters were sent by SLA to Convoy and its solicitors (“CCKS”), both marked as having been sent ‘By Fax [number stated] & By Post’. The content of the letters was identical, being as follows:
48.The letters were sent by fax at 4:38pm, namely just 22 minutes before the AGM was due to commence. I assume they were also sent by post, even though that was plainly pointless except for record purposes. 49.It is also of note that – despite the terms of the draft order already presented to the Deputy Judge – the letter does not suggest that any application was being made against Convoy, or that there was any application to prevent or to interrupt the holding of the AGM. 50.Indeed, despite the fact that the materials were available by then, the letters did not enclose or make any reference to any of the draft affirmation and affidavit, draft order and skeleton argument, which were materials already provided to the court in support of the ex parte application. The letters did not even identify the judge who would hear the application, or the intended time of the application. Even if the recipient of the letter had wished to rush to court, there was simply no information as to when or where to go. 51.Further, despite the fact that some time was obviously taken to have drafted and typed out the letters, the most obvious way of giving urgent notice – namely by a telephone call or calls – was ignored. All this against the facts subsequently revealed that SLA was instructed to take out the ex parte application at around 12 noon, and a trainee solicitor of SLA had telephoned the Deputy Clerk of Court (Civil) at around 12:30pm seeking an urgent ex parte injunction hearing no later than 4pm that day. Indeed, immediately after that call, Ms Katrina Kwan (the partner of SLA) also called the Deputy Clerk requesting, amongst other things, that the hearing be scheduled to be heard at 4pm. There were also further follow-up calls with the Deputy Clerk at about 2pm, 2:38pm and 2:55pm. 52.When there was (a) the clear ability to have made telephone calls, (b) SLA’s knowledge as to the identity of the solicitors acting for Convoy and the Directors (and Zhu), and (c) at least four hours between the receipt of instructions to make the application and the intended time of that application, it is difficult to avoid the conclusion that there was (1) a deliberate decision not to telephone any party who might be affected by the application, and (2) a deliberate decision to wait until almost the last moment before purporting to give notice of the hearing. It is also difficult to avoid the conclusion that, even at that point, there must also have been a deliberate decision not to identify who would hear the application or to include with the letters any of the materials which would be used in support of the application, notwithstanding that they had already been provided to the court. 53.It is not necessary to be very cynical to think that a telephone call was avoided because it would inevitably had led to questions which, if answered, would have provided far more relevant information than was contained in the wholly inadequate letters. Even sending emails might be recognised as likely more effective rapid communication in 2021 than the chosen use of fax and post. 54.Bearing in mind that the ex parte application was actually primarily focused on the voting and counting of the 13th to 15th respondents’ shares, it is also instructive to see how any notice was purportedly given to those respondents. Each of them was sent a letter in very similar terms to the letter sent to Convoy and CCKS. In passing, I might point out that the terms are themselves unclear, as they might reasonably be read that the 13th to 15th respondents were being told that an injunction was being sought against them for them to vote at the AGM (as opposed to not to vote). 55.However, in any event, despite the fact that each of the letters stated that Chen was “in the course of seeking an ex-parte application against” them:
56.I note that the index prepared by SLA to the Correspondence Bundle used later at the inter partes hearing describes those various letters as “giving notice of the Ex-parte Injunction Hearing”. I refuse to accept that anyone could have honestly believed those letters were giving any prior notice – let alone any proper notice – to any of those defendants of the hearing. Simply telling someone in a letter to be sent by post that you are in the process of applying for some form of injunction against them is, frankly, ridiculous. The letters were utterly pointless, and can only be described as a complete charade. 57.The problem was seriously compounded during the hearing itself, when the Deputy Judge was led (actually, misled) to believe that Eagle Legacy, Oceana Glory and Zhu had been given notice at about 4pm, by fax to their solicitors. Nothing on the face of the letters says they were sent by fax. 58.One of the solicitors from SLA present in court, instructing Mr Lam, was Ms Kwan. The oddity of that fact is that Ms Kwan had been appointed by Chen as his proxy relating to voting 1,115,387,000 of his alleged shareholding at the AGM, namely all but 1,000 of his shares (the proxy for those 1,000 votes was Mr Chow). Rather than attend the AGM as Chen’s proxy, Ms Kwan instead attended the ex parte hearing as his solicitor. One result of that choice was that there was not even an attempt at the AGM to vote the vast majority of Chen’s shares. It might be thought a bit rich for Chen now to complain that his votes would not be counted and/or were not counted, when he did not even try to vote them and have them counted. 59.A transcript of the ex parte hearing has been obtained. It identifies that the Deputy Judge had only received the papers at about 4:25pm, and he straightaway told Mr Lam that he had only read Mr Lam’s skeleton submissions, an unspecified part of my November 2020 Judgment and the draft order – “that’s all”. He made it very clear he had a “very, very limited understanding of the case”, but Mr Lam told him that the materials he should be aware of for the present purpose were “also limited”. Against the context which I have set out above, that is a rather startling submission. Later in the hearing, the Deputy Judge made clear that he had not even read any of the affirmations, but Mr Lam did not direct him to those affirmations so as to take him through them or suggest that the Deputy Judge might stand down for a few minutes to read them. 60.Understandably, an early question posed by the Deputy Judge was whether the application was made with notice or without notice. Mr Lam told him it was made “with notice”. As pointed out above, first he suggested notice had been given to Eagle Legacy, Oceana Glory and Zhu at about 4pm, by fax to their solicitors. He also said that Convoy and its solicitors had been given notice, by fax at about 4:20pm to 4:30pm. I assume Mr Lam would have said those things on instructions, but they were not true, and no one present with him in court appears to have corrected him. 61.After the Deputy Judge suggested that one way to proceed might be simply to allow the AGM to go ahead, and if a resolution was passed which had an adverse impact on Chen, he might come to court to apply for an injunction to restrain Convoy from carrying out that resolution, Mr Lam submitted that that would not work where “R13 to 15 … in effect are acting in concert with the directors”. (This submission is slightly ironic in light of the inter partes summons which was later issued – see below). 62.Mr Lam’s submissions focused on the fact that Chen’s votes had not been counted at the EGM the day before, albeit a little later Mr Lam also explained briefly what had happened at the EGM by reference to not counting Chen’s votes yet counting the votes of Eagle Legacy, Oceana Glory and Zhu. Mr Lam described that as the “change of circumstances” since my November 2020 Judgment, as it was now well-known that the Board would not count Chen’s shares while still counting the others “without much explanation, apparently suggesting some … unfair treatment … between the two camps”. The clear implication in that submission was that nothing relevant as to any “change of circumstances” had happened in the period between my November 2020 Judgment and the EGM on 17 March 2021, though that was plainly incorrect (see below). 63.There followed some discussion as to what difference would be made depending on whose shares were or were not counted. When the Deputy Judge pointed out that there was no evidence on that point, Mr Lam undertook “if necessary” for someone to give that evidence. The undertaking was later recorded in the ex parte Order. 64.It is clear from the Deputy Judge’s question about the potential difference in voting result that he asked it on the basis that Chen would try to vote but would not be allowed to vote. That might have been a suitable occasion on which to have informed the Deputy Judge of the relevant and material fact that the person holding the proxy for the vast majority of Chen’s shares was not at the AGM, and would not be going to the AGM, as she was in court. Therefore, although complaining that his votes would not be counted as a result of alleged bad faith, Chen was not actually even making any attempt to vote his shares and have them counted, so that no question of any motive in excluding them could possibly arise on the facts. Unfortunately, the Deputy Judge was not provided with this information. 65.There was no explanation in Mr Lam’s skeleton argument or in any oral submission made by him at the ex parte hearing as to the legal basis upon which Chen might seek to deprive all of the shareholders, including the 13th to 15th respondents, from having an AGM. This might be thought particularly problematic when Chen chose not to seek to have his votes counted, and where there has been no challenge to the validity or legality of the 13th to 15th respondents’ votes (and where Chen’s own challenge to their votes is on a very different basis). 66.The ex parte Order ultimately made by the Deputy Judge was made by his making manuscript amendments to the draft order provided to him. Essentially, the Deputy Judge crossed out all of the primary relief as had been sought, leaving only the varied alternative relief of an ‘interim interim’ order restraining Convoy from holding the AGM until the return date of the inter partes summons. The ex parte Order was made shortly before the hearing before the Deputy Judge ended at 5:12pm. 67.A copy of the unsealed manuscript order was sent by SLA to CCKS, but only after the AGM had concluded. It was sent by fax to CCKS at 9:09pm. A sealed copy of the ex parte Order was only provided under cover of a letter dated 19 March 2021. On the same day, it was provided also to the solicitors for the Directors (“ONC”). 68.Copies of the sealed ex parte Order were sent under cover of letters dated 19 March 2021 to Eagle Legacy and Oceana Glory, again by post to the PO Box address in the British Virgin Islands. A copy was apparently sent by post, but this time also by fax, to the solicitors for Zhu. Those solicitors responded informing that they had no instructions to act for Zhu in the captioned proceedings HCMP 2178/2020. 69.By fax letter sent at 5:23pm on 19 March 2021, CCKS complained to SLA that it still had not been served with any of the documents used on the ex parte application, including any summons, affirmation in support and the skeleton argument. It is difficult to fathom why those documents still had not been provided, more than 24 hours after the application had been made. 70.By fax sent just before 4pm on 22 March 2021, ONC also complained that, despite being served with a copy of the ex parte Order, they still had not been served with the papers used in making the application for that order, including but not limited to the summons, the supporting affirmation(s), the draft order, the skeleton submissions and list of authorities and any other papers submitted to the court. Again, even if the ex parte Order was not expressly directed at the Directors, it is difficult to fathom why those documents still had not been provided, by then almost 4 days after the application had been made. D. AGM 71.The AGM was held at 5pm on 18 March 2021. The agenda for the meeting included: (1) to receive and consider the now published audited accounts for 2017, 2018 and 2019; (2) to re-elect certain incumbent directors as directors; (3) to authorise the Board to fix directors’ remuneration; and (4) to reappoint Zhonghui Anda CPA Ltd as auditors and to authorise the Board to fix the auditors’ remuneration. 72.There are slightly competing versions of what transpired at the meeting, though the differences are not of great moment fr present purposes. 73.In his 2nd affidavit, Mr Chow says that at the beginning of the meeting an unknown person announced that Lee Jin Yi (“Lee”), the 6th respondent to the Petition, was chosen to act as the Chairman of the AGM. Then at around 5:03pm, a man purporting to be a shareholder of Convoy raised an objection under Article 74 as to the voting rights of Kwok, Chen and Madam Wang and their respective nominees, asking the Chairman to decide whether they should be allowed to vote. Mr Chow then made submissions to the Chairman saying, amongst other things:
74.After a short discussion with persons behind him, lasting probably less than a minute, the Chairman determined and declared under Article 74 that (other than 2,000 of Kwok’s shares purchased separately) all other shares of Kwok, Chen and Madam Wang were not eligible to vote, but the shares of the 13th to 15th respondents were eligible to vote. 75.At around 5:09pm, a solicitor representing Kwok questioned that decision and challenged whether it was pre-determined and whether the different treatments were made in bad faith. The Chairman declined to make any further comment. Mr Chow then reiterated that Chen took the view that the Chairman should consider the matter with the same yardstick. Whilst acknowledging the objection, the Chairman made no further comment. 76.At around 5:13pm, Mr Chow received a call from Ms Kwan informing him that SLA had obtained an injunction from the Deputy Judge to restrain Convoy from holding the AGM on 18 March 2021 until the return date or further order. Mr Chow does not reveal in his affidavit whether he already knew that an application was being made, but neither does he express any surprise at having received the call from Ms Kwan. Nor does Mr Chow reveal any concern or surprise that he held proxy for only 1,000 of Chen’s shares, and that the person holding proxy for the vast majority of Chen’s shares was not even present at the AGM so preventing any attempt to vote the shares. 77.Mr Chow says that after receiving the call from Ms Kwan about the injunction he immediately verbally notified the Chairman of that fact, but after around 10 seconds the Chairman disregarded what he had said, stopped the question and answer session from the shareholders at the AGM, and immediately pressed on with the AGM and voting. Other shareholders tried to raise further questions and comments, but the Chairman disallowed all of them. 78.Incidentally, that Ms Kwan was well able to have telephoned Mr Chow to tell him that an injunction had been obtained only demonstrates that she would have been well able to have telephoned Mr Chow earlier, to ask him to inform those present at the AGM (perhaps even before it began) that an application for an injunction was about to be made or was underway. 79.Mr Chow says that at around 5:24pm, he received a soft copy of the draft order from Ms Kwan by way of WhatsApp. Surrounded by the staff of Convoy, Mr Chow shouted to the Chairman that he had a soft copy of the draft on his phone and waved the phone in the air for the Chairman to see it. The Chairman ignored the order and pressed on with voting. Mr Chow says he unequivocally told the Chairman, the board of directors and the advisers that it would be a contempt if Convoy continued the AGM. Nevertheless, the Chairman ignored him and proceeded to take a vote a request for an adjournment was ignored. 80.In his draft 2nd affirmation, Chen essentially repeats the same matters on information and belief, and from what he describes as a transcript of the meeting. 81.In his 2nd affirmation, Mr Yap E Hock (“Yap”) – himself the 4th respondent, but filing evidence for Convoy, his 1st affirmation having been made in support of the application to strike out the Petition – pointed out that Lee was appointed as Chairman of the AGM by vote of the directors, in accordance with Convoy’s Articles. Yap then referred to the objections raised in the speech made by Mr Chow, but emphasises that no mention was made by Mr Chow that Chen was seeking ex parte relief. 82.About 20 minutes into the AGM, at about 5:18pm, Mr Chow suddenly said “an injunction had been sought to adjourn the meeting” which was “granted by Mr Justice MK Liu”. He did not produce a copy of the injunction, sealed or draft, in hard copy or electronic form. Yap says he considered it highly unlikely that a judge would have granted an urgent ex parte injunction in the circumstances. Further, it turns out that contrary to Mr Chow’s suggestion that an injunction was granted to “adjourn” the AGM, the injunction was to restrain Convoy from “holding” the AGM, which was by then well underway. By the time of Mr Chow’s interruption, the only step left to be done was the taking of the poll on the agenda items. After consulting with ONC on Mr Chow’s representations, Lee as chairman decided to take a poll and concluded the AGM. 83.Broadly the same points were made in Convoy’s public announcement dated 21 March 2021 as to the Poll Results of the AGM held on 18 March 2021. E. Inter Partes Summonses 84.It is convenient first to mention that by summonses dated 23 March 2021, the Company and the Directors applied for an order discharging the ex parte Order. Such applications might normally be the ‘flipside’ of a continuation application. 85.In accordance with the usual practice when obtaining an ex parte order, the ex parte Order in this case was made (in part) on the usual undertaking that the petitioner would serve on the respondents a summons to be heard on the return date. Ordinarily, the inter partes summons issued following obtaining an ex parte order seeks the inter partes continuation of the order obtained ex parte in the same or substantially similar terms. But, in this case that did not happen. 86.Instead, the inter partes summons which was issued by Chen on 2 March 2021 sought an order (in the terms of a draft attached to the summons): (1) to restrain Convoy, whether by itself or its agents or otherwise, from acting upon and/or implementing the resolutions purportedly passed at the AGM; and (2) to restrain each of the 2nd, 3rd, 4th, 7th and 8th respondents, whether by him/herself or otherwise, from holding themselves out or acting as a director of Convoy. 87.Mr Shieh submitted that form of injunction was to “give practical effect” to the ex parte Order. 88.Mr Shieh submitted that the ex parte application relied upon the EGM on 17 March 2021, to substantiate the inference that there would be bad faith in the directors’ exercise of the Board’s power under Article 74 at the AGM. He said that it was only at the EGM on 17 March 2021 that for the first time Chen’s shares were ruled ineligible and were not counted, just before the imminent AGM fixed for the following day. 89.Mr Shieh submitted that the inference of bad faith has proved right, because: (1) Chen’s votes were disregarded whilst the votes of the 13th to 15th respondents were allowed to be cast, without explanation for such unequal treatment; (2) Lee had an obvious actual conflict of interest in chairing the AGM (because he is a respondent to the Petition and one of the applicants that the Petition be struck out); and (3) Lee has pre-determined the matter against Chen (because he did not ask about the terms of the draft ex parte Order and rushed through the AGM). 90.However, first it might be noted that the power under Article 74 falls to be exercised by, and was in fact exercised by, the Chairman of the AGM (and not by the directors or the Board as a whole). 91.Anyway, Mr Shieh submitted that, against the evidence of bad faith, the court should not hesitate to exercise its implied jurisdiction to make whatever orders are necessary to give effect to its own judgments. Giving practical effect to the ex parte Order, by granting an injunction in the terms sought by the inter partes summons, would prevent Convoy from benefiting from its own wrong of ignoring the ex parte Order. 92.Mr Shieh also submitted that the balance of convenience was in favour of granting the new injunction sought. This was in part because the hearing before the Listing Review Committee was fixed for 30 March 2021, but should be deferred pending the investigation by the Financial Reporting Council (“FRC”) into the audited financial statements. He also submitted that the applications for discharge of the ex parte Order were academic. In any event, he submitted, given the Company’s conduct at the AGM that all points to bad faith, even if the ex parte Order were to be discharged, a re-grant – or to be more precise, a grant of the injunction sought inter partes to give effect to the ex parte Order – would be warranted in the interest of justice. F. Starting Analysis 93.I have already pointed out that, despite that it was Chen’s complaint that his votes would not be counted, Chen did not apply for any injunctive relief that his alleged votes should be counted. Indeed, because the proxy holding the majority of his purported voting rights was Ms Kwan, who went to court instead of to the meeting, Chen did not even attempt to exercise those voting rights at the AGM. 94.First, that meant that any alleged ill-motive in excluding his votes from being counted became factually irrelevant (except as to just the 1,000 votes for which a proxy was present at the AGM). Secondly, against the chronological context, the reason for this approach seems obvious. Where the only basis for interfering in the process of the AGM identified in Mr Lam’s skeleton argument was that Chen’s votes were discounted at the EGM on 17 March 2020 in bad faith, the proper relief to have sought would have been by an application requiring his votes to be counted. But Chen was well aware that a similar challenge made by Kwok in advance of a different general meeting had been rejected by my November 2020 Judgment. He also knew of the two earlier Harris J decisions rejecting similar allegations of bad faith made as regards the discounting of Kwok’s shares on a similar basis. 95.Further, if Chen had wished to seek an interim injunction to restrain a chairman of a general meeting from counting the votes of the 13th to 15th respondents, he could have done so as early as when he presented the Petition on 25 November 2020, by which Chen has sought the final relief of an injunction to restrain them from voting. 96.I also consider that §111 of my November 2020 Judgment does not actually provide or “constitute the foundation of the present application” (as Mr Lam put it in his ex parte skeleton argument). In fact, in the following paragraph, §112, I made it clear that the court would be in the best position to consider whether any decision made under Article 74 should not be treated as final and conclusive only after such a decision had been made. 97.Given that (a) Ms Kwan did not attend the AGM to vote as proxy, so that the vast majority of Chen’s shares could not be (and were not) counted at the AGM, and (b) the injunction application as directed against the 13th to 15th respondents’ votes was refused by the Deputy Judge, it is difficult to see why or on what basis the whole AGM could be affected. There is no proper explanation offered by or for Chen, as there is no proper explanation. G. Material Non-Disclosure 98.The material non-disclosure on the ex parte application made in this case was massive and serious. 99.This is despite the fact that the Deputy Judge expressly asked during the ex parte hearing whether he needed to be reminded of anything “to discharge the full and frank disclosure obligation”, to which Mr Lam replied “No”. 100.First, the Deputy Judge was not informed that Chen is not a registered member of Convoy, and that there was an extant application to strike out his Petition including on the basis that he has and had no locus standi to bring these unfair prejudice proceedings. Nor was the Deputy Judge informed that directions had been given by consent for a timetable of filing evidence and for the substantive argument on the strike out application to be fixed for a hearing with one full day reserved. Whilst Mr Shieh spent some time in his oral submissions to me seeking to identify why the fact that Chen is not a registered member is not a fatal flaw – by reference to Tipp Investments PCC v Chagala Group Ltd (BVIHC (Com) 2016/102, 9 November 2016) and the possible joinder of HKSCC Nominees Ltd as 19th respondent – none of those submissions were made to the Deputy Judge. (The ultimate merit of those submissions will be dealt with by me when I hear the strike out application.) 101.I note that, albeit only at the inter partes hearing, I was provided with a copy of Ms Kwan’s affidavit which explained that she had not instructed Mr Lam about the strike out application because it had slipped her mind at the time. I accept that Mr Lam, therefore, probably did not know of this aspect – though I also note he apparently told the Deputy Judge this was his case. 102.Secondly, the Deputy Judge was not informed that Chen’s chosen proxy for the vast majority of his shares would not even attend the AGM, and so would not even attempt to vote those shares at the AGM, so that no motive for excluding them could even arise. 103.Thirdly, the Deputy Judge was not informed that the validity or legality of the shares of Eagle Legacy, Oceana Glory and Zhu has not been challenged by anyone, and the complaint of differential treatment made by Chen is rather seeking ‘to compare apples and oranges’. 104.Indeed, though I accept that §95 of it was one of the sixteen paragraphs Mr Lam’s skeleton argument asked him to read, the Deputy Judge was not expressly informed and told of the materiality of the specific parts in my November 2020 Judgment where – also in the context of evidence of connections between Chen and Kwok and they being privies – I held that the equivalent challenge to the validity of Chen’s shares as was made about Kwok’s shares arose where there was “reasonably strong evidence in support of Convoy’s case” that Kwok is a fraudster and that the shares of Convoy in his hands are the fruits of a fraudulent scheme and void. This links to the point that the discounting of Chen’s shares at the EGMs on 7 January 2021 and 17 March 2021 was on the basis that his shares were considered void, and that there was the Main Action which had been brought to declare those shares void, matters not brought to the attention of the Deputy Judge. 105.Fourth, though Mr Lam had asked the Deputy Judge to read §111 of my November 2020 Judgment, the Deputy Judge was not informed that the real thrust was to be found in §112, where I stated that the court would be in the best position to consider whether any decision made under Article 74 at a general meeting should be treated as final and conclusive only after the particular decision has been made, judged against the particular factual context of that meeting. I specifically pointed out that it was at that point that the Court is able to see what actually happened, and whether there was any basis upon which to interfere (whatever the basis of interference might be). I stated that where interference in advance may in effect grant final relief, the case in which it would be appropriate to jump in rather than await actual events must be rare in the extreme. 106.Fifth, the Deputy Judge was not informed clearly about the two decisions of Harris J. In the first of his decisions, Harris J held the chairman’s decision under Article 74 is final and conclusive, so that the decision can be subsequently overturned in a court of law only if it is proved that the chairman made the decision in bad faith, that is dishonestly, or for ulterior motive, and that otherwise the chairman’s decision once made cannot be subsequently overturned in a court of law even if it was wrong as a matter of law, irrational, or Wednesbury unreasonable. One can note the reference to “subsequently overturned”, which matches the approach identified in my November 2020 judgment. In the second of his decisions, Harris J rejected the allegation that the chairman’s decision not to count Kwok’s shares as qualified was made in bad faith (because they were alleged to be void, on materials rehearsed in the Main Action). Further, that second decision was upheld by the Court of Appeal, but the Deputy Judge was not informed of that either. 107.Sixth, the Deputy Judge was not reminded that Chen’s submission presumes that bad faith can be inferred from a lack of explanation, and that settled principles identify that inferences of bad faith can only be drawn where such inferences are compelling. The Deputy Judge might usefully have been pointed to a recent example of the application of that principle when the Court of Appeal upheld Harris J’s approach in rejecting another previous attempt to impugn the decision of the chairman of an EGM on the basis of bad faith (see above). 108.Seventh, the Deputy Judge was not informed that Mr Lam’s skeleton submissions identified no real irreparable harm as might flow from the refusal of the ex parte application. Indeed, the Deputy Judge’s instinct was that any proper basis for interfering with a decision taken at the AGM would remain open for consideration after the AGM. This is correct as a matter of law: see, for example, Li Ming v Zhang Caikui [2018] HKCFI 1042 at §15, where G Lam J pointed out that “there can be EGMs after EGMs”. Directors re-elected at an AGM can be removed and business also transacted at the AGM can be reviewed in subsequent legal proceedings. 109.Eighth, the Deputy Judge was not expressly informed as to what occurred at the EGM on 7 January 2021, leading to SLA’s letter of 14 January 2021 which made essentially the same complaint of bad faith as was put forward over two months later in support of the ex parte application. 110.Ninth, by the time the ex parte application was being heard, the AGM had been validly called and commenced, but the Deputy Judge was not informed of the principle that once an AGM is validly called, it is no longer competent for the company or its directors to postpone the meeting except as per the prescribed procedures in its articles of association: see Kaye v Oxford House [2020] BCC 117 at §100. The AGM was called on 18 February 2021, when notice was published, and there was no suggestion that it was not validly called. The Deputy Judge was not told that there is no provision in Convoy’s Articles which vests in the Board the power to adjourn or refrain from holding the AGM. Instead, Article 64 provides that the power to adjourn the AGM lies with the chairman of the meeting with the consent of the meeting. Further, in acting as chairman of the AGM, Lee (or whoever was elected chairman) was not acting as a representative of the directors of Convoy, but as a representative of the members present at the meeting. In any event, the ex parte Order obtained did not direct Lee (or whoever was elected chairman) to exercise a power to adjourn the AGM, notwithstanding how Mr Chow apparently described the injunction when he interrupted the AGM after receiving Ms Kwan’s call. (Incidentally, this is also why the suggestion that the ex parte Order was improperly ignored is misplaced.) 111.Plainly, these were all material matters which should have been drawn to the attention of the Deputy Judge. It is, of course, no answer if it were to be pointed out that the material non-disclosure occurred in the rushed circumstances, where what was materially non-disclosed clearly identifies that any rush caused was entirely self-inflicted. H. Other Abuse 112.It cannot be in dispute that ex parte applications should be regarded as exceptional, and the court should not entertain such applications unless there are cogent justifications for doing so, usually by reference to one or both of extreme urgency or the need for secrecy. 113.It is frequently repeated – albeit depressingly frequently overlooked or ignored – that ex parte orders are only made “where the situation is of such extreme urgency that there is literally no time to warn the defendant of what is proposed or where the purpose of the injunction will or may be frustrated if the defendant is informed”: see, for that original phrasing, Brand, Farrar Buxbaum v Samuel-Rozenbaum (unreported, HCA 5191/1998, 8 May 2002) at §24. 114.It is also trite that where there is no justification to make an ex parte application, either on the ground of urgency or the need for secrecy, the court can set aside any order obtained on that ground alone: see, for a recent example, China Medical Technologies Inc (in liquidation) v Wu Xiaodong [2019] HKCFI 1266 at §26. 115.In this case, there was clearly no need for any secrecy. Indeed, the Deputy Judge was told that the application was not being made secretly, but was being made “on notice” (however misleading that was). 116.Nor was there any justification in urgency. Chen’s shares were disqualified at the EGM held on 7 January 2021. That fact was published in Convoy’s public announcement of 8 January 2021. It is disingenuous for Chen now to suggest, as he does, that his votes were not excluded or held to be ineligible for counting, and that the first time he might have raised complaint was after the EGM on 17 March 2021. Indeed, SLA wrote (under Ms Kwan’s reference) the letter of 14 January 2021 specifically complaining that Chen’s shares had been excluded from qualification for voting on 7 January, and that there was no basis to exclude Chen’s shares whilst at the same time allowing those of the 13th to 15th respondents. The letter effectively made the same point as was later put forward to justify the ex parte application, and suggested the differential treatment was “malicious and unfair” – a clear allegation of bad faith. That letter, and its content, was also specifically mentioned by Mr Chow in his statement made to the EGM on 17 March 2021 (though the Deputy Judge was not directed to that letter, nor had he read and he was not directed to Mr Chow’s draft affidavit containing the statement with that reference). 117.If Chen had any genuine concerns about whether his shareholding would be disqualified (whilst at the same time those of the 13th to 15th respondents would be considered qualified), Chen could either have made an application in advance of the EGMs fixed for 17 March 2021, or at any time after 18 February 2021, when he received notice of the AGM fixed for 18 March 2021. He chose not to do so. 118.As I have already indicated, on the materials, it is difficult to avoid the conclusion I have made that there was a deliberate decision not to give any real notice to Convoy or the Directors (or indeed other respondents), so as to deny them the chance to attend the hearing or to see the grounds of the application. This decision is inexcusable. As it happens, Mr Shieh rightly did not really seek to defend the indefensible failure to have given proper notice of the ex parte application. 119.That failure is compounded by the fact that the ‘last-minute’ letters sent were in reality no notice at all; the notice letters did not even actually identify that injunctions were being sought against Convoy. It is further compounded by the fact that the Deputy Judge was misled to believe that Convoy (and other respondents) had been given notice of the application that was to be made, when they had not. Indeed, even if those particular letters had been sent earlier, they would not have given notice of the actual application that was made. 120.It was an abuse for the letters addressed to the 13th to 15th respondents to have been sent by post. 121.It was also an abuse for the letters purportedly giving notice not to have included any of the materials being used for the ex parte application – not even Mr Lam’s skeleton argument, which barely trickled onto a third page – notwithstanding that the materials had already been provided to the court. 122.It is not clear on the evidence, because Chen’s deponents have not covered the relevant ground, whether Mr Chow was aware of the ex parte application at the time that he attended and spoke at the AGM. If he was, that was a further abuse. (I would point out that though, as a matter of fairness, I placed no reliance on this possibility in reaching my conclusion at the hearing, I would expect the evidential gap to be filled when I consider further the appropriate costs consequences – see below). 123.In any event, the evidence as a whole points to an intended ambush of the AGM. 124.The abuse before and during the hearing was then compounded by the delays in providing the parties affected by the ex parte Order with the materials used to obtain that order. I. Conclusion 125.On Mr Shieh’s own submissions, the orders sought on Chen’s inter partes summons stand or fall with the ex parte Order. If the ex parte Order should never have been made, as it should not, the attempt to ‘piggyback’ on it is doomed to failure. 126.In any event, the opportunistic inter partes attempt to salvage something from the debacle was also without real foundation. There is no reason properly to restrain the directors who were re-elected at the AGM from acting as such. Nor does it follow that the investigations of the FRC into Convoy’s auditors should necessarily delay or prevent the adoption of the accounts in general meeting. Further, I do not accept that even a prima facie case of bad faith has been shown. Indeed, it seems to me that a recognition of that fact may be found in the way it was argued that the purpose of the inter partes summons was to “give effect to” the ex parte order, rather than standing on its own foundations. Further, any of the other principles applicable to an application for interim injunctive relief would also lead to the rejection of the inter partes application. 127.The inevitable result is that the ex parte Order must be discharged, and the inter partes application must be refused. Those were the orders I made. J. Costs 128.I was also satisfied that the appropriate costs order to be made in the exercise of my discretion was for Chen to pay the costs on an indemnity basis, with (where applicable) a certificate for three Counsel. 129.At the hearing, Mr Wong also invited me to consider making a ‘wasted costs order’ that Chen’s solicitors be personally liable for the costs. Such a possible order requires a two-stage approach. As to the first stage, in light of the various matters canvassed above, I am satisfied that I have before me evidence or other material which, if unanswered, would be likely to lead to a wasted costs order being made, and that the wasted costs proceedings are justified notwithstanding the likely costs involved. 130.It is now necessary to proceed to the second stage, when I shall consider whether it is appropriate to make the order, after giving SLA and/or the individual solicitors concerned an opportunity to give reasons why the court should not make a wasted costs order in this case. I set 5pm on 29 April 2021 as the deadline for giving any such reasons. Once I have received any such reasons, I will give further directions (though proposed directions might usefully be agreed between the parties). K. Amendment Summons 131.Also on 23 March 2021, Chen issued a summons (“Amendment Summons”) seeking to join four further respondents to these proceedings commenced by his Petition. The proposed 16th to 18th respondents are additional directors. The proposed 19th respondent is HKSCC Nominees Ltd. 132.The proposed amendments also seek to add averments about factual matters said to have arisen since the Petition was issued. 133.I adjourned the Amendment Summons to be heard on the same date as the strike out application. Obviously, if the Petition is an arguably bad, there is no point in ordering joinder or amendment. There is also the possible question as to joining the proposed 19th respondent as one way of curing one suggested defect in the proceedings. 134.I reserved the costs of the Amendment Summons. L. Date for Strike Out Argument 135.At the hearing, I took the opportunity to fix a date for the substantive argument of the Directors’ application to strike out the Petition – and, on the same day, the Amendment Summons. The date has been fixed for 10am on 9 September 2021 (with one day reserved). M. Postscript 136.Apart from the self-induced rush, when there was no genuine urgency, part of the problem with this application lay in that it was heard by the Deputy Judge, who had had no prior involvement with the serial litigation surrounding Convoy, and no time to get anything like ‘up to speed’. 137.Acknowledging that Harris J will not hear further cases relating to Convoy, any future applications as might be made would sensibly be directed to a Judge who does have knowledge of the wider context (against which context any application almost certainly would have to be viewed). 138.Therefore, in this and other similar series of linked litigation, applicants might usefully identify to the Deputy Clerk at the time of seeking an urgent hearing the specific identity of the Judge or Judges who might be well-placed to deal with the hearing, because of their previous involvement in the particular or related litigation. 139.For example, as indicated above, I had already given directions in this very action relating to a (relevant) substantive argument to be heard by me. Had I been told on the afternoon of 18 March 2021 that there was an intended application, described as urgent, arising in litigation connected to or part of a series of litigation in which I had already written several judgments, and in an action where I was due to hear another substantive argument, I might well have been able (or have felt obliged) to make time to have heard the application. 140.Had I done so, it may have saved a considerable amount of court time, parties’ expense, and perhaps even some red faces.
Mr Paul Shieh SC, leading Mr Gary CC Lam and Mr James Man, instructed by So, Lung & Associates, for the petitioner Mr William Wong SC leading Mr Lai Chun Ho, instructed by Charles Chu & Kenneth Sit, for the 1st respondent Mr José Maurellet SC, leading Mr Jason Yu and Ms Jasmine Cheung, instructed by ONC Lawyers, for the 2nd to 12th respondents The 13th to 15th respondents were not represented and did not appear The proposed 16th to 18th respondents were not represented and did not appear Mr Martin Rogers, of Davis Polk & Wardwell, for the proposed 19th respondent |
Cases cited in this judgment
Other judgments that cite this case