Chan Kin Tat (on behalf of Himself and All Other Members of Yan Chai Volleyball Club) and Others v. Volleyball Association of Hong Kong, China Ltd and Others

HCMP 960/2022

[2023] HKCFI 2064

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 960 OF 2022

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J U D G M E N T

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A.  INTRODUCTION

1.This is the hearing of the Originating Summons dated 20 July 2022 (“OS”).

2.By the OS, the Plaintiffs seek, inter alia, declaratory relief that the resolution dated 20 April 2021 (“Resolution”) passed by the board of the 1^st Defendant is ultra vires and null and void and that the five unincorporated associations they represent (“Five Teams”) remain full members of the 1^st Defendant.

B.  BACKGROUND

B1.  The parties

3.Each of the Plaintiffs is suing in representative capacity on behalf of himself/herself and other members of the Five Teams, which are volleyball clubs/teams and comprise of Yan Chai Volleyball Club (“Yan Chai”), ALPS Sports Association (“ALPS”), Aspiring Volleyball Team (“Aspiring”), Ching Lung Volleyball Club (“Ching Lung”) and Kwai Tsing Women’s Volleyball Team (“Kwai Tsing”).

4.The 1^st Defendant, Volleyball Association of Hong Kong, China Limited (“VBAHK”), was incorporated as a company limited by guarantee on 4 September 2012 in Hong Kong.

(a)  According to paragraph 4(a) of the Memorandum of Association of VBAHK (“Memorandum”), VBAHK is recognised as the authority for volleyball in Hong Kong by the Fédération Internationale de Volleyball, the Asian Volleyball Confederation and the Sports Federation and Olympic Committee of Hong Kong, China.

(b)  Article 2 of the Articles of Association of VBAHK (“Articles”) provides that there are two classes of membership in VBAHK, namely full membership and associate membership. Article 3 further provides that no person shall be admitted to membership unless approved by the board of directors of VBAHK.

(c)  Under the Articles, full members enjoy additional rights and privileges that associate members do not. For example, full members are counted towards quorum and entitled to vote at the general meetings of VBAHK (Articles 17 and 24). Full members are also eligible to nominate persons for election and appointment as directors of VBAHK and to be appointed as members of the executive committee of VBAHK (Articles 32 and 62).

5.In 2019, the Five Teams were admitted as associate members of VBAHK.

6.The 2^nd to 10^th Defendants are the current board of directors of VBAHK (“Current Board”).

B2. The Resolution

7.In early December 2020, the previous board of directors of VBAHK (“Previous Board”) received the Five Teams’ applications for full memberships.

8.On 6 December 2020, the Previous Board approved the applications of ALPS, Aspiring, Ching Lung and Kwai Tsing for full memberships. Yan Chai’s application for full membership was approved by the Previous Board on 14 December 2020 (collectively “Admission Decisions”).

9.The Current Board (with the exception of the 9^th and 10^th Defendants) took office on 18 December 2020.

10.It is the Defendants’ evidence that:

(a)  The Five Teams were the first batch of members admitted as associate members and also the first batch applying for full memberships since VBAHK’s incorporation in 2012.

(b)  Both before and after the Admission Decisions, VBAHK received written complaints from members (including existing full members) on the lack of transparency of admission criteria of members. The legality of the Admission Decisions was also called into question.

(c)  In light of the wave of complaints received by VBAHK, the Current Board decided to take legal advice. The advice obtained by the Current Board was that the Board of VBAHK had the power and duty to re-examine the appropriateness of previous decisions made in relation to admission of members and to address any underlying problems in the decision-making process.

11.On 20 April 2021, the Current Board convened a special board meeting and passed the Resolution, according to which the Admission Decisions were reversed and the Five Teams were reverted to being associate members pending rectification actions regarding membership selection and admission criteria.

12.The Five Teams were informed of the Resolution by letters dated 11 May 2021.

13.The Five Teams were dissatisfied with the Resolution and wrote to VBAHK in protest on 17 and 18 May 2021. The Five Teams demanded the Current Board to set out in writing the reasons for passing the Resolution.

14.On 2 June 2021, VBAHK issued a reply letter to the Five Teams (“Formal Reply”). It is stated in the Formal Reply that:

(a)  VBAHK received complaints in relation to the admission criteria and had sought legal advice on the legality of the Admission Decisions by the Previous Board.

(b)  The Current Board considered a number of factors which could be summarised as follows:

(i)  In April 2019, the VBAHK circulated a memo on the specific admission criteria for associate membership to all members (“Memo”). The Memo set out a number of criteria for associate memberships and provided that if an associate member failed to meet the criteria for three consecutive years, the Board might revoke their associate memberships. As a matter of fact, the Previous Board had not conducted the said criteria assessment, and there had not been a lapse of 3 years when the Five Teams made the applications for full memberships.

(ii)  In the last paragraph of the Memo, it was stated that the timing and conditions for applications of full memberships by associate members and assessment criteria by the Board would be decided by the Board in the future (“準會員申請作為全屬會員的時間與條件與董事會審議申請準則，將由董事局未來另作決議。”). In the preceding two years, the Previous Board had not suggested, discussed or made any resolution on such matters. The associate members and associate teams of VBAHK had no way of finding out the conditions for full memberships.

(iii)  According to Article 5 of the Articles, members are required to pay membership fees. The Previous Board had not suggested, discussed or made any resolution on such requirements.

(c)  Apart from Article 5(f) of the Articles, there had not been an objective set of assessment criteria for applications of full memberships by associate members. The complaint made by the existing members on the lack of an objective and transparent admission policy and criteria was a valid one, and the Board had to take actions to rectify the same.

(d)  The Resolution was passed in order to preserve the legitimacy of full memberships and the rights of full members in the future.

(e)  The Current Board had also set up a committee for amendment of the Articles at the meeting on 20 April 2021 to conduct work on the research, consultation and amendment of the Articles in relation to the eligibility of members and application procedure. The Current Board would set out and publish the admission criteria and procedure for applications of full memberships by associate members as soon as practicable and would invite the Five Teams to re-submit their applications.

15.The Five Teams remained dissatisfied with the Formal Reply and issued various public statements in protest of the Resolution.

C.  THE PARTIES’ RESPECTIVE CASE

16.On 20 July 2022, the Plaintiffs commenced the present proceedings. The reliefs sought by the Plaintiffs in the OS are in the following terms:

“1. A declaration that the board resolution passed by the 2^nd to 10^th Defendants on 20 April 2021 insofar as it purported to terminate the full membership of Yan Chai Volleyball Club (仁濟排球會), ALPS Sports Association, Aspiring Volleyball Team (力臻排球隊), Ching Lung Volleyball Team (青龍排球會) and Kwai Tsing Women’s Volleyball Team (葵青女子排球隊) (collectively referred to as the “Five Teams”) is ultra vires, null and void and/or inoperable and/or of no effect;

2. A declaration that the Five Teams remain “full members” of the 1^st Defendant;

3. An injunction restraining the 2^nd to 10^th Defendants, whether by themselves or by their servants or agents or otherwise howsoever, from terminating and/or otherwise dealing with the membership status of the Five Teams save and except in accordance with the Memorandum and Articles of Association of the 1^st Defendant; and

4. Costs.”

17.As set out in paragraph 10 of the affirmation in support of the OS, the essence of the Plaintiffs’ allegation is that the Current Board acted ultra vires and in breach of the Memorandum and Articles of VBAHK (“M&A”) and natural justice in passing the Resolution.

18.The Defendants deny the allegations. In summary, the Defendants contend that (a) the Board has general power under the Articles to deal with membership-related issues and to receive complaints and rectify a previous Board’s defective decision; and (b) that the principles of natural justice are inapplicable in the present case.

D.  APPLICABLE PRINCIPLES

19.There is no serious dispute between the parties on the applicable principles.

20.A company’s articles of association represent a contract between the company and its members and amongst members: Companies Ordinance (Cap 622) (“CO”), s86(1).

21.Section 728(1)(a)(iii) of the CO provides that s729 applies if, in relation to a company, a person has engaged, is engaging or is proposing to engage in conduct that constituted, constitutes or would constitute a breach specified in s728(4). Section 728(4)(c) further provides that the breach specified for the purposes of s728(1)(a)(iii) is a breach of the company’s articles.

22.Pursuant to s729(1) of the CO, the Court may, on the application by a member of the company whose interests have been, are or would be affected by the conduct, grant an injunction on the terms that the Court thinks fit, order the person to pay damages to any other person and declare any contract to be void or voidable to the extent specified in the order.

23.As part of his/her duty to act in good faith in the interests of the company, a director is under a duty to act in accordance with the company’s constitution. A director also has a duty to follow the procedures in the company’s constitution: YiFung Developments Limited v Liu Chi Keung Ricky & Ors, HCA 1341/2014, 25 April 2016 at §§15-16.

24.Where the directors carry out a transaction without obtaining proper authorisation in accordance with the articles of association, the consequence is that the transaction is without legal effect and not merely voidable: YiFung (supra) at §17. See also Wong Pui Ying & Ors v Kowloon Tong Baptist Church [2020] HKCFI 518 in which the Court granted a declaration that the resolution passed by the council of management of a church violated a provision in the articles and was null and void (§§31 and 62).

25.The memorandum and articles of association of a company fall to be construed in accordance with the established rules for the interpretation of contracts. This involves giving to the words used their ordinary meaning derived from the context in which they appear: Towcester Racecourse Co Ltd v The Racecourse Association Ltd [2003] 1 BCLC 260 at §16.

26.The articles of association of the company should be regarded as a business document and should be construed so as to give them reasonable business efficacy, where a construction tending to that result is admissible on the language of the articles, in preference to a result which would or might prove unworkable: Holmes & Anr v Keyes & Ors [1959] Ch 199 at 215.

E.  WHETHER THE RESOLUTION WAS PASSED IN BREACH OF THE M&A

27.The issue of whether the Resolution was passed in breach of the M&A turns on the proper interpretation of the relevant provisions therein.

E1. Relevant provisions in the M&A

28.The following provisions in the Memorandum touch upon memberships in VBAHK.

(a)  Paragraph 4(b)(i) of the Memorandum provides that VBAHK may “make rules binding on the Members of [VBAHK] and on the individual membership of such Members and generally regulate the affairs of [VBAHK]”.

(b)  Paragraph 4(b)(iv) of the Memorandum further provides that VBAHK may “suspend, disqualify, fine or otherwise deal with any Member which, or any officer or any player who, has transgressed against any of the Articles or any rules made thereunder or has practised, counselled, or sanctioned any conduct arising out of or in connection with volleyball which conduct, is, in the collective opinion of [VBAHK], unfair, ungentlemanly or damaging to the interests of volleyball”.

29.The Articles contain more detailed provisions on memberships in VBAHK.

30.As mentioned, Article 2 provides that there are two classes of memberships in VBAHK, namely associate memberships and full memberships. According to the definition section of the Articles, the reference to “Member” in the Articles is a reference to a member of VBAHK whether it be an associate member or a full member.

31.Article 3 provides that no person shall be admitted to membership unless approved by the Board. In other words, the power to approve memberships rests solely with the Board.

32.Article 5 concerns eligibility and admission. It reads as follows:

“5. Eligibility and Admission

(a) All applications for memberships shall be in writing and signed by the applicants in such form as the Board may from time to time determine and shall be subject to the approval of the Board.

(b) All Members, honorary president(s) or patrons of the Association shall abide by the Memorandum and Articles of Association of the Association.

(c) The Board may from time to time determine the amount of entrance fee and annual subscription which a Member has to pay, if any.

(d) Application for membership shall be made in such manner as the Board may decide.

(e) Admission as a Member shall require only a simple majority vote of the Board.

(f) Before admitting an applicant to Full Membership the Board must satisfied that the applicant:

(i) has been an Associate Member of the Association for a period of sufficient duration as decided by the Board from time to time;

(ii) continues to satisfy the criteria in Article 11;

(iii) has made a positive contribution towards the promotion and active encouragement of the playing of volleyball; and

(iv) has paid any annual subscription due in accordance with Articles; and

(v) is a properly constituted club, sports association, society either registered with the Companies Registry in Hong Kong, registered or exempted under the Societies Ordinance, Chapter 151, Laws of Hong Kong, or otherwise being or properly affiliated to any schools, universities or educational institutions duly established and/or authorised in Hong Kong.

(g) Notwithstanding Article 5(a) to (f) above, the existing members of the formerly Volleyball Association of Hong Kong, China as listed in the Schedule 1 shall be admitted as Full Members.”

33.Several observations may be made on Article 5.

(a)  Article 5(a) makes it clear that all applications for memberships “shall be subject to the approval of the Board”.

(b)  The use of the word “must” in the opening sentence of Article 5(f) indicates that there is a mandatory requirement imposed on the Board to satisfy itself that any applicant for full membership fulfils the five separate requirements specified therein.

(c)  Article 5(f)(i) specifically provides that an applicant for full membership must be an associate member of VBAHK “for a period of sufficient duration as decided by the Board from time to time”. It is clear that the Board is the ultimate arbiter on what constitutes “a period of sufficient duration”.

(d)  Article 5(f)(ii) provides that the Board must be satisfied that the applicant for full membership “continues to satisfy the criteria in Article 11”. Article 11 sets out the criteria for associate membership and will be addressed below.

(e)  Article 5(g) provides that the members listed in Schedule 1 “shall be admitted” as full members. They are therefore not subject to the requirements under Article 5(f). According to Schedule 1 of the Articles, there are a total of 29 full members admitted under Article 5(g).

34.Article 9 concerns expulsion of members. It provides that:

“If any Member shall wilfully refuse or neglect to comply with the provisions of the Memorandum & Articles of Association of [VBAHK], or shall be guilty of any conduct likely to be injurious to [VBAHK], as the case may be, such Member shall be liable to expulsion by a resolution of the Board, provided that at least one week before the meeting at which such resolution is passed, the Member who is affected thereby shall be notified in writing by [VBAHK] thereof and shall be invited to attend the meeting and to give any explanation or defence, in writing or verbally, which it may think fit.”

35.Articles 10 and 11 concern admission of associate members and read as follows:

“10. The Board may establish such classes of associate membership with such description and with such rights as they think fit and may admit and remove such associate members in accordance with such regulations as the Board shall make.

11. Before admitting an applicant to Associate Membership the Board must be satisfied that the applicant:-

(a) is a properly constituted club, sports association, society or other group of persons according to law, custom or practice;

(b) has as one of its principal objects, the promotion and active encouragement of the playing of volleyball; and

(c) has a sufficient number of members to enable it to participate in games, competitions, tournaments, events and programmes conducted under the jurisdiction of [VBAHK], including participation by its individual membership as players, coaches, committeemen, officials, administrators or referees.”

36.Articles 39 and 40 are provisions concerning the powers and duties of the Board. They provide that:

“39. The business of [VBAHK] shall be managed by the Board, who may pay all expenses incurred in promoting and registering [VBAHK], and may exercise all such powers of [VBAHK] as are not, by the Ordinance or by these Articles, required to be exercised by [VBAHK] in general meeting, subject nevertheless to the provisions of the Ordinance of these Articles and to such regulations, being not inconsistent with the aforesaid provisions, as may be prescribed by [VBAHK] in general meeting; but no regulation made by [VBAHK] in general meeting shall invalidate any prior act of the Board which would have been valid if that regulation had not been made.

40. In particular, the Board shall have the following powers and functions:

(a) to determine and settle all questions and disputes relating to volleyball in Hong Kong which may be referred to it for decision;

(b) to consider and approve policies, proposals or other recommendations in relation to the objects of [VBAHK], its organization and day to day management;

(c) to decide all matters affecting or concerning [VBAHK] or any of its members (provided that any proposal for the modification of the eligibility criteria set out in Articles 5, 10 and 11 must be approved by special resolution at a General Meeting; and

(d) to make and enforce rules for the administration and control of [VBAHK] and volleyball in Hong Kong, including terms of references for its committees, sub-committees and advisers, the organization, promotion, management control and conduct of matches competitions and events, and shall have power to vary, amend, replace and repeal any such rules. All such rules shall be binding on the Directors and on all members and on the individual membership of such members provided that such rules may be modified or set aside by the members in General Meeting.”

E2.  Alleged breach of Paragraph 4(b)(iv) of the Memorandum and Article 9 of the Articles

37.Mr Danny Fung, counsel for the Plaintiffs, submitted that Paragraph 4(b)(iv) of the Memorandum and Article 9 of the Articles are the “exclusive codes for dealing with membership status” and that they contain “restrictive and mandatory criteria and procedure to follow”. Mr Fung submitted that these provisions have not been followed because no complaint was levelled against the Five Teams regarding the pre-defined transgressions as set out in those provisions. It is also submitted that the Resolution was passed “in camera” without (a) the ascertainment of VBAHK’s collective opinion at a general meeting and (b) giving advance notice and right to be heard to the Five Teams.

38.I agree with Mr Andrew Mak (appearing with Ms Ann Lee), counsel for the Defendants, that Article 9 is not engaged.

(a)  Article 9 is concerned with “expulsion” of members. The ordinary meaning of “expulsion” is that it refers to “the act of forcing somebody to leave a place” or “the act of sending somebody away from a school or an organization, so that they can no longer belong to it”: Oxford Advanced Learner’s Dictionary.

(b)  The Resolution only has the effect of reversing the membership status of the Five Teams from full memberships to associate memberships. The Five Teams remain as associate members of VBAHK at all material times. As such, the Five Teams have never been “expelled” from VBAHK.

(c)  Insofar as it may be suggested that the Five Teams had in effect been “expelled” from full memberships of VBAHK by virtue of the Resolution, Article 9 is clearly directed at expulsion of a member from VBAHK altogether, as opposed to expulsion of a member from a particular class of membership.

(d)  In any event, the evidence show that the Five Teams have not been “expelled” permanently from VBAHK or indeed from the full memberships in VBAHK. In the last sentence of the Formal Reply, the Five Teams are expressly invited to re-submit their applications for full membership after the Board has set out and published the admission criteria. This invitation for re-submitting the applications for full memberships does not sit well with any notion of “expulsion”.

39.I do not consider that Paragraph 4(b)(iv) of the Memorandum is engaged either. That provision is concerned with the jurisdiction of VBAHK to “suspend, disqualify, fine or otherwise deal with any Member” in the event of transgression against the Articles or the commission of the specified misconduct by such member. As can be seen from the Formal Reply, the passing of the Resolution was not based on any transgression against the Articles or any misconduct by the Five Teams. The Resolution also did not seek to suspend, disqualify, fine or otherwise deal with the Five Teams based on such transgression or misconduct. It follows that Paragraph 4(b)(iv) does not assist the Plaintiffs.

40.I also disagree with Mr Fung’s submission that Paragraph 4(b)(iv) of the Memorandum and Article 9 of the Articles are the “exclusive codes for dealing with membership status”. As shown in Section E1 above, there are other provisions in the M&A dealing with membership status.

41.Accordingly, I reject the Plaintiffs’ case that the Current Board passed the Resolution in breach of Paragraph 4(b)(iv) of the Memorandum and Article 9 of the Articles.

E3.  Alleged breach of Articles 39 and 40 of the Articles

42.Mr Fung also submitted that insofar as the Current Board acted on the Memo in passing the Resolution, the Memo purported to modify or override Article 5 in which the criteria for admission to full memberships are set out, and this amounted to a breach of the limitations and requirements under Articles 39 and 40(c).

43.On the evidence before me, it seems that the Current Board did not just rely on the Memo as the sole basis for passing the Resolution. Various other matters have been referred to in the Formal Reply. Specifically, it is stated in the penultimate paragraph of the Formal Reply that the Current Board passed the Resolution in reversing the status of the Five Teams from full members to associate members with a view to preserving the legitimacy of full membership and the rights of full members in the future.

44.Be that as it may, I do not agree that the Memo has the effect of modifying or overriding Article 5 as contended for by Mr Fung.

(a)  Apart from the final paragraph, the Memo itself is not related to the eligibility for full memberships (which is the subject matter of Article 5(f)) at all.

(b)  A substantial part of the Memo relates to the conditions for associate memberships and the assessment criteria adopted by the Board for associate memberships.

(c)  The final paragraph in the Memo merely states that the timing and conditions for applications of full memberships by associate members and the assessment criteria by the Board would be decided by the Board in the future.

(d)  In view of the contents of the Memo and the expressed intention to defer the decision on the timing and conditions for applications for full memberships by associate members to the future, I am unable to see how it could be said that the Memo had the effect of overriding or modifying Article 5.

45.For the same reasons, I am not satisfied that there is any violation of the “special resolution requirement” under Article 40(c).

(a)  Article 40(c) provides that the Board shall have the power to “decide all matters affecting or concerning [VBAHK] or any of its members”, provided that “any proposal for the modification of the eligibility criteria set out in Articles 5, 10 and 11 must be approved by special resolution at a General Meeting”.

(b)  As mentioned, the Memo does not have the effect of modifying the eligibility criteria set out in Article 5 for full memberships. The requirement for special resolution at a general meeting in the proviso of Article 40(c) is not engaged.

(c)  It may be said that the Memo has the effect of modifying the eligibility criteria set out in Article 11 for associate memberships. However, since it is common ground that the Five Teams remained as associate members of VBAHK after the passing of the Resolution and the present dispute is solely concerned with the Five Teams’ status as full members (and not as associate members), it is not necessary for me to express any view on this matter.

46.Further, Article 5(f)(i) provides that the applicant must be an associate member “for a period of sufficient duration as decided by the Board from time to time” (emphasis added). It is plain from this provision that (a) the period of “sufficient duration” is a matter to be decided by the Board; and (b) the power to decide the period of “sufficient duration” for being an associate member for admission for full membership rests with the Board alone. It is not a power which is “required to be exercised by [VBAHK] in general meeting” under Article 39. The Memo is in fact consistent with these provisions because it states that the timing for applications for full memberships by associate members would be decided by the Board in the future. As such, I am unable to accept Mr Fung’s submission that there is any violation of the “non-usurpation” limitation or the “consistency” limitation under Article 39.

47.Mr Fung relied on the decision of Wong Pui Ying (supra) in support of his challenge on the Memo. In that case, it was held at §47 that the handbook approved by the council of management of the church could not be used to add to the conditions of entitlements or to abrogate or restrict the privilege under Article 7 of the articles of association of the church. Apart from drawing comparison between the handbook in Wong Pui Ying and the Memo in the present case, Mr Fung also sought to rely on the purported similarity between Article 36 of the articles of association of the church in Wong Pui Ying conferring power and authority on the councillors and Article 39 of the Articles in the present case.

48.I am not convinced that one can derive much assistance in the comparison exercise as suggested by Mr Fung. The conclusion in Wong Pui Ying was reached by the Court upon the interpretation of the various provisions in the articles in that case. Even if Article 36 of the articles may be similar to Article 39 of the Articles in this case, it does not necessarily follow that the same conclusion should be reached. In fact, as fairly accepted by Mr Fung at the hearing, there does not appear to be an equivalent provision such as Article 40 giving specific powers to the Board of VBAHK in the articles in Wong Pui Ying. At the end of the day, the issue of interpretation in the present case must be resolved by reference to the actual provisions found in the Articles.

49.In his oral submissions, Mr Fung further contended that Articles 39 and 40 are not wide enough to give the Current Board the power to pass the Resolution. I disagree.

(a)  Article 39 provides that the business of VBAHK shall be managed by the Board. As submitted by Mr Mak, the general management power entrusted with the Board under Article 39 is wide enough to cover the power to receive complaints and rectify any defective decision if necessary. It is within the power of the Current Board to adopt a mechanism of receiving and addressing complaints from members of VBAHK, including reviewing and rectifying decisions made by the Previous Board on issues concerning memberships, as part and parcel of its management of the business of VBAHK.

(b)  Article 40 gives “particular” powers and functions to the Board. Article 40(b) gives the Board the power to “consider and approve policies, proposals or other recommendations” in relation to, inter alia, “day to day management”. Article 40(c) further gives the Board the power to “decide all matters affecting or concerning [VBAHK] or any of its members” (emphasis added). The Board’s decision on an application for full membership is squarely a matter affecting or concerning its members.

(c)  Articles 39 and 40 should also be read in conjunction with Articles 3 and 5. Article 3 provides that no person shall be admitted to membership unless approved by the Board. Article 5(a) provides that all applications for memberships shall be subject to the approval of the Board. These provisions give the Board the express power to approve or not approve any admission to membership. Article 5(f)(i) further provides that the period of sufficient duration for being an associate member before admission to full membership is a matter to be decided by the Board.

(d)  Properly construed, the powers conferred on the Board under the Articles are wide enough to cover the actions taken by the Current Board to address members’ complaints in relation to the Admission Decisions and to review and reverse a decision made by the Previous Board on a matter concerning admission to membership.

(e)  I also agree with Mr Mak that it would be contrary to business efficacy (which is a relevant consideration in interpreting articles of association as mentioned in §26 above) to hold that whilst the Board has the power to approve an application for full membership, it has no power at all to reverse its earlier decision on approval after considering the complaints it received from members on the previous decision. The suggestion that the Board has no power to address such complaints by reversing its earlier decision would also mean that the Board could not exercise its powers under the Articles to manage the business of VBAHK and to decide all matters concerning VBAHK and its members in a workable manner.

50.I therefore reject the Plaintiffs’ case that the Resolution was passed in breach of Articles 39 and 40 of the Articles.

51.As a result, the Plaintiffs have failed to establish that the Resolution was passed in breach of any provision in the M&A.

F.  WHETHER THE RESOLUTION WAS PASSED IN BREACH OF THE PRINCIPLES OF NATURAL JUSTICE

52.At the hearing before me, Mr Fung acknowledged the difficulties of his arguments on natural justice as applied in the company context. In the circumstances, he confirmed that the Plaintiffs’ complaint on breach of natural justice principles would only be premised upon the arguments based on Paragraph 4(b)(iv) of the Memorandum and Article 9 of the Articles. Mr Fung submitted that the principles of natural justice have been codified in these provisions.

53.In view of my conclusion on the applicability of Paragraph 4(b)(iv) of the Memorandum and Article 9 of the Articles in Section E2 above, I do not consider that the argument based on natural justice takes the Plaintiffs’ case any further.

G.  CONCLUSION

54.For the above reasons, I dismiss the OS.

55.Costs should generally follow the event. I therefore make an order nisi that the costs of the OS (including all costs reserved) be paid by Plaintiffs to the Defendants with certificate for one counsel, to be taxed if not agreed.

Mr Danny Fung, instructed by Cheng & Ng, for the Plaintiffs

Mr Andrew Mak and Ms Ann Lee, instructed by Li & Partners, for the Defendants