Yeung Ka Lai v. Mark Gain Investment Ltd

HCMP 473/2021

[2021] HKCFI 1382

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 473 OF 2021

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BETWEEN

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D E C I S I O N

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1.There is before me the originating summons dated 9 April 2021 commenced by Madam Yeung Ka-lai seeking the following orders:

“(i)  A general meeting be convened for Mark Gain Investment Limited (the Company);

(ii)  The attendance of the applicant at the extraordinary general meeting shall constitute a quorum (EGM);

(iii)  14 days’ notice for the EGM to be dispensed with;

(iv)  A resolution to be put at the EGM and, if thought fit, be passed for the appointment of director or directors of the company;

(i)  Liberty to apply.”

2.After considering the helpful written and oral submissions made by Mr Keith Tam, counsel for the applicant, I made an order in terms.  These are my brief reasons for the making of the order. 

Background

3.The company was originally run and operated by the applicant, together with her late husband, Mr Cheng Kwok-wai, who sadly passed away in January of this year.  The applicant’s late husband and her good self were the only two shareholders and directors of the company.  The issued share capital of the company is HK$10,000 comprising of 10,000 shares issued and credited as fully paid up.  The position prior to the applicant husband’s passing was that whilst he held 99 per cent of the shares, she held 1 per cent.  The company is in the business of selling, maintaining and repairing electric traffic barrier gates. The company is solvent and able to pay its debts as they fall due. 

4.Article 5 of the company which adopted the commonly used “Table A” of the predecessor Companies Ordinance (Cap 32) provides as follows, Article 5:

“Unless otherwise determined by the company general meeting, the number of directors shall not be less than two.”

5.Article 8 provides that:

“Unless otherwise determined by the directors, the quorum of the directors’ meeting shall be two directors personally present or represented by their substitutes.”

6.The applicant’s position is that it is impractical for an EGM to be held because article 8 provides that the quorum for directors’ meeting shall be two directors personally present or represented by their substitutes. 

7.The applicant’s late husband has left a will dated 18 January 2017 (the “Will”), a copy of which was exhibited and which I have considered.  Under the said Will, the applicant, together with her two sons, were appointed as executors and trustees under it.  The applicant, together with her two sons, are beneficiaries of the entire estate.

8.However, one Madam Yeung Jan-ling has entered a caveat on 5 February 2021.  As such, it can be anticipated that there is likely to be contentious or protracted proceedings in relation to the Will.  Due to the applicant’s late husband’s passing, there is no way a quorum can be constituted, either at director’s level or at general meeting level.  This, in turn, would obviously have an impact on the ability of the company to be operated properly and in accordance with basic rules of corporate governance. 

Applicable Principles

9.Section 570 of the Companies Ordinance provides that:

(1)  This section applies if for any reason it is impracticable—

(a)  to call a general meeting of a company in any manner in which general meetings of that company may be called; or

(b)  to conduct the meeting in the manner prescribed by the company’s articles or this Ordinance.

(2)  The Court may, either of its own motion or on application—

(a)  by a director of the company; or

(b)  by a member of the company who would be entitled to vote at the meeting,

order a general meeting of the company to be called, held and conducted in any manner the Court thinks fit.

(3)  If the order is made, the Court may give any ancillary or consequential directions that it thinks expedient.

(4)  Directions given under subsection (3) may include a direction that one member of the company present at the meeting in person or by proxy is to be regarded as constituting a quorum.

(5)  A general meeting called, held and conducted in accordance with an order under subsection (2) is to be regarded for all purposes as a general meeting of the company duly called, held and conducted.

(6)  The legal personal representative of a deceased member of a company is to be regarded in all respects, for the purposes of this section, as a member of the company having the same rights with respect to attending and voting at a meeting of the company as the deceased member would, if living, have had.

10.The purpose of section 560 is to prevent a “log jam” in the operation of a company where one of the two members of the company has died or other situations where it has become impracticable to call a meeting.  For these purposes, it is trite law that “impracticable” does not mean impossible.  The court must examine the individual circumstances in a particular case to determine the practicality of the matter and whether or not the proposed meeting should or should not be convened.  (See Re Reign Digital Creatives [2020] HKCFI 3137 per Coleman J and Re Yaumati Kai Fong Welfare Advancement Association Limited [2007] 4 HKLRD 643 per Kwan J (as Kwan VP). 

11.In that decision, her Ladyship noted that:

“The section is intended to have a wide scope. Further, the court should examine the circumstances of the particular case and ask, as a practical matter, if the desired AGM could be conducted. I bear in mind that ‘impracticable’ does not mean impossible in that context.”

12.One is therefore dealing with the exercise of judicial discretion, which encompasses a large number of factors.  As Yuen JA noted in Re Success Plan Ltd [2002] 3 HKLRD 560 at paragraphs 46 to 48, such factors would include the possibility of unfair prejudice or unfair prejudicial conduct arising from the court-ordered meeting.  The court would not lend its aid by ordering a meeting where it could be shown that the result of it would be allow one party behaving in a way which was clearly oppressive. 

13.There is no question that in this case the applicant has locus pursuant to section 570(2)(a) as she is both a director and a contributory. 

Conclusion

14.It seems to me that it is a clear case where there is jurisdiction, and the discretion should be exercised in favour of the applicant.  There seems to be no countervailing factor militating against the exercise of the discretion in her favour.  

Mr Keith Tam, instructed by Chan & Chan, for the applicant

The respondent was not represented and did not appear