Chung Shun Ying and Another v. Wong Wah on and Others
Read the full judgment text of HCMP 152/2022 on BabelCite. This High Court CFI judgment was delivered on 26 June 2024.
1. The 5 th Respondent, Tsung Tsin Association (the “ Association ”), a company limited by guarantee, was incorporated in Hong Kong on 2 May 1959. The predominant object of the Association is to promote and protect the industrial, commercial and other lawful interests of the Hakka Community. The Association had about 300 members in 2018 and currently has about 240 members. The Association holds substantial assets including a building known as Tsung Tsin Building and cash in the sum of HK$60 m
Cited by 2 cases · Cites 9 cases
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HCMP 152/2022 [2024] HKCFI 1281 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 152 OF 2022 ___________
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____________________ J U D G M E N T ____________________ A. BACKGROUND 1.The 5th Respondent, Tsung Tsin Association (the “Association”), a company limited by guarantee, was incorporated in Hong Kong on 2 May 1959. The predominant object of the Association is to promote and protect the industrial, commercial and other lawful interests of the Hakka Community. The Association had about 300 members in 2018 and currently has about 240 members. The Association holds substantial assets including a building known as Tsung Tsin Building and cash in the sum of HK$60 million in early 2020 and about HK$33 million as at January 2021. The Association also operates the Tsung Tsin Middle School (the “School”). 2.The management and control of the Association are vested in the Executive Committee (the “EC”), which then elects its Executive Standing Committee (the “ESC”). There is also a supervisory committee (the “SC”) in the Association. 3.Before 16 September 2021, the affairs of the Association were governed by the Memorandum and Articles of Association filed in 1959 (subsequently amended in 1960, 1965 and 1982) (the “Old Memorandum” and the “Old Articles” respectively). 4.By a special resolution dated 16 September 2021, a new set of Articles of Association was adopted by the Association (the “New Articles”). As most of the acts complained in the Petition occurred before 16 September 2021 (with the exception of the expulsion of the memberships of the 1st and 2nd Petitioners (as set out hereinafter)), the Old Memorandum and the Old Articles remain relevant. 5.In late 2017, the 1st Respondent (“R1”) together with some other members were unhappy with the work of the then ESC, namely the 36th ESC and sought an election such that a new ESC be elected to replace the 36th ESC. An election was held on 24 September 2017 (the “September 2017 Election”) whereby the 37th ESC was formed with R1 elected as the Chairman. However, the 36th ESC refused to recognize the validity of the September 2017 Election. 6.Another election was held on 22 May 2018 (the “May 2018 EGM”) whereby once again R1 was elected as Chairman of the 37th ESC. The 36th ESC still refused to recognize the result of the May 2018 EGM. R1 then petitioned under HCMP 2056/2018 for an order that the result of the May 2018 EGM be recognized. After much litigation[1], eventually the management and control of the Association were handed over by the 36th ESC to the 37th ESC in 2020. 7.Less than 2 years after the taking over of the management of the Association by the 37th ESC, the Petitioners (“Ps”) now allege various wrongdoings against the Respondents (“Rs”), and rely on those as bases for the present unfair prejudice petition. Other than the present petition, a derivative action was commenced by another 2 members of the Association against the 1st, 2nd and 3rd Respondents under HCMP 468/2021 (the “Derivative Action”). Pursuant to the Order of Linda Chan J on 19 December 2022, the Derivative Action was stayed pending the determination of the present petition, as the present proceedings were at that time at a more advanced stage with witness statements already exchanged on 11 October 2022. 8.There is suggestion that those who were ousted from power from the 36th ESC are behind the present litigations against Rs. It is thus apparent that the Association has been plagued by litigations caused by power struggles between various camps of members at least from 2017 until now. The reason why various camps of members would fight for power over the management of the Association is because of the amount of assets held by the Association which, as apparent from my analysis of the evidence below, are effectively at the free disposal of those in power. B. DRAMATIS PERSONAE 9.The prominent persons featured in the Petition are as follows:
C. PETITIONERS’ COMPLAINTS 10.In the Petition filed on 28 January 2022, the various wrongdoings alleged by Ps against R1 – R4 (which are still pursued at the trial) are as follows:
D. RELIEFS SOUGHT 11.Ps seek the following reliefs pursuant to sections 724 – 725 of the Companies Ordinance (Cap 622) (the “Ordinance”) against the R1 – R4:
E. MISCONDUCT VS MISMANAGEMENT & DERIVATIVE ACTION VS UNFAIR PREJUDICE PETITION 12.Mr Adrian Leung, appearing with Mr Sunny Chan, counsel for R1 – R4, took a preliminary point against the Petition, namely, the complaints, even if proven, do not make out a case of mismanagement. At best, the complaints (if proven) would give rise to a case of directors’ misconduct, which ought to be pursued by the Association (by way of a common law or statutory derivative action or by the Association’s own volition), rather than by Ps as personal petitioners. 13.As set out above, the Derivative Action was in fact commenced in April 2021 but was subsequently stayed pending the resolution of the present action. 14.Mr Leung accepted that the court does have jurisdiction in the present unfair prejudice petition to grant relief that are normally granted in derivative actions if appropriate. Mr Leung only submitted that in the present circumstances of the case it would not be appropriate to do so. 15.Ps also seemed to have accepted that certain complaints should be pursued by way of derivative action instead of the present unfair prejudice petition. This is apparent from the fact that relief is not sought for all of the alleged wrongdoings. Notably, no corresponding relief is sought for the HK$5 Million Payment to Right Point and the HK$5 Million Payment to KC. 16.Mr Roland Lau, counsel for Ps, accepted that no relief is sought for some of the complaints made and as such, the court is not asked to grant any relief for such allegations even if they are proven. It was submitted by Mr Lau that if appropriate, the findings of fact in the present proceedings will be relied upon, and that the reliefs for such complaints would be sought instead in the Derivative Action that had been stayed. 17.As I am not privy to the background and history behind the stay of the Derivative Action, I had doubts as to whether this course would be open to Ps. It is also odd that if that was the Ps’ plan, why is the court being asked to make factual findings in relation to those complaints in the present proceedings rather than in the Derivative Action. However, parties informed me that the reason why the Derivative Action was stayed was simply that the present proceedings were at a more advanced stage. In particular, Mr Leung and Mr Chan did not contend that the Derivative Action could no longer be pursued after the present proceedings are determined. 18.In any event, I am bound by what has been pleaded in the Petition and there was no application to amend the Petition to include reliefs for all of the alleged wrongdoings. 19.It is on this basis that I proceed to make factual findings on all the alleged wrongdoings even though relief may not be sought in relation to some of them. F. PECULIAR FEATURE 20.In a typical unfair prejudice petition, a petitioner’s complaint would usually be that certain acts were carried out by a respondent despite objections having been raised by the petitioner, and that those acts were unfairly prejudicial to the petitioner. 21.What is peculiar in the present case however, is the fact that not only were most of the alleged wrongdoings of Rs seemingly carried out pursuant to the resolutions of either the EC or the ESC of the Association, P1 and some of the witnesses in support of the petition were in fact part of the members who voted in favour of some of the alleged wrongdoings in the first place. The details of such resolutions for the alleged wrongdoings are set out as follows:
22.Ps now challenge the validity of such resolutions. As the evidence transpired, it became apparent that many of the members of the EC or ESC (including P1, as well as CYL and WHP) were not discharging their duties and obligations properly in failing to have given any meaningful consideration to the resolutions before approving them. 23.Mr Leung and Mr Chan fairly accepted that in an unfair prejudice petition, there is no independent or overriding requirement that the petitioner should come to court with clean hands. The conduct of the petitioner may be material in that it may render the conduct on the other side not unfair even if prejudicial, or may affect the relief which the court thinks fit to grant in the event unfair prejudice is made out[2]. 24.This is one of the factors that I take into account in determining the appropriate relief, if any. G. THE INVESTIGATION COMMITTEE 25.Rs rely heavily on the fact that after the commencement of the Derivative Action, a so-called Independent Investigation Committee (the “Investigation Committee”) was formed in 2021 which carried out an investigation (the “Investigation”) on the following 5 alleged wrongdoings (the “5 Issues”), the first 4 of these issues being identical to some of the alleged wrongdoings in the present Petition:
26.It is contended by the R1 – R4 that the Investigation Committee was constituted by neutral members of the Association and was advised by independent legal advisors. A report from the Investigation dated 19 May 2022 was issued (the “Investigation Report”), whereby the Investigation Committee concluded that R1 – R3 had committed no fault in the 5 Issues. By an Extraordinary General Meeting dated 15 June 2022, the Investigation Report was adopted by 91 out of the 92 members of the 37th ESC. It is thus submitted on behalf of R1 – R3 that any alleged wrongdoings in the 5 Issues had been ratified by the Association and R1 – R3 are not liable. 27.The Investigation Committee was allegedly formed pursuant to a resolution passed by 100 members at an Extraordinary General Meeting on 26 May 2021. However, no evidence of such a meeting (such as minutes) was produced. 28.The Investigation Committee originally consisted of 7 members, including Tung, R4, Choi Yiu Shing, Chiu Kin Keung, Lau Cheng Heung, Fong Yuk Yam and Cheng Suet Mei (who resigned on 29 April 2022). The complainants of the 5 Issues refused to give evidence or take part in the Investigation as they disputed the neutrality and legitimacy of the Investigation Committee. 29.Ps also dispute the neutrality of the Investigation Committee on the basis that all the members of the Investigation Committee were from the camp of R1, R2 and R3, or new members recruited by them. R1 accepted during cross-examination that none of the members of the Investigation Committee was an ordinary member (as opposed to a member of the EC or ESC) of the Association. When asked during cross-examination whether he felt that the Investigation Committee was fair and impartial, R1’s answer was: “I do not know”. 30.As will be discussed below under each separate wrongdoing, without having to decide whether the members of the Investigation Committee were related to the Rs’ camp, I find that the relevant conclusions were reached by the Investigation Committee with no proper examination nor investigation and the conclusions reached therein are thus unsound and unreliable. H. CREDIBILITY OF WITNESSES 31.7 witnesses in total gave evidence. In assessing credibility of the witness under the various issues, I adopt the often cited principles in Hui Cheung Fai and Other v Daiwa Development Limited and Others[3] by Deputy High Court Judge Eugene Fung SC at §§76-82:-
32.In Star Glory Investment Limited v Kai Tuo (H.K.) Technology Company Limited & Ors [4], Chung J adopted the following test:
33.I have adopted the above principles in assessing the credibility of the various witnesses making the factual findings. I. FACTUAL FINDINGS (1)(a) R2’s Appointment 34.There is no dispute that R2’s membership was revoked in April 2007 after he was convicted of a charge of indecent assault in March 2004 (the “Conviction”). What is in dispute is whether his membership was reinstated. Ps allege that as R2 was never reinstated as a member, he could not have been elected or appointed as the Chief Officer of the General Affairs Section of the Association. 35.R2 relies on a copy of the members’ register 2018-2019-2020 (the “2018-2019-2020 Register”) where his name is listed as entry no. 238 to assert that his membership had been reinstated by that time and that he was a member. However, there is at the same time another members’ register 2018 (the “2018 Register”) produced by Ps, which is in a completely different format, in which R2’s name does not appear. 36.R4, who is said to have been in charge of keeping the members’ register gave evidence that she was not the one who prepared the 2018-2019-2020 Register and that she received it from KC, the solicitor advising the Association at the relevant time. R4 agreed that she had also seen the 2018 Register in the Association’s computer record. At first R4 said that the 2018 Register was a register that had not been updated but she could not provide any explanation as to why R2 was not recorded as a member in the 2018 Register, whose membership should appear in both versions if his membership had been reinstated since 2010 (as claimed by R2). 37.The minutes of an EC/SC joint meeting held on 16 April 2007 shows that there was a resolution to the effect that the membership of R2 was revoked on 16 April 2007 by reason of the Conviction. The resolution went on to provide that if after 3 years there was no criminal record or acts bringing the Association into disrepute, R2 could apply to reinstate his membership (“三年後如無犯罪紀錄或有損本會聲譽者，可申請恢復會籍”). There is no dispute that this resolution was valid. 38.R2 in his oral evidence denied that he needed to apply for the reinstatement and insisted that the reinstatement was automatic after 3 years in 2010. 39.However, the plain reading of the words “可申請恢復會籍” clearly suggests that an application for reinstatement needs to be made. The reinstatement is also clearly subject to the condition that there was no criminal record in the preceding 3 years or any acts bringing the Association into disrepute. It thus goes against common sense to suggest that no application and no discussion on whether the conditions had been met needs to be made and that reinstatement is “automatic”. I therefore reject R2’s own wishful interpretation. 40.Further, R2 did request for his membership reinstatement to be processed in 2010. As recorded in the minutes of an ESC meeting on 15 July 2010, the ESC considered R2’s request by letter dated 14 July 2010. The resolution of the ESC at that time was that the matter be adjourned. A copy of a letter from the Association to R2 dated 13 September 2010 informing R2 of the ESC’s decision on 15 July 2010 to adjourn the matter is also produced, to show that R2 had been informed of the adjournment (the “Adjournment Letter”). 41.Despite the fact that R2 denied having received the Adjournment Letter, the reality is that R2 could not point to any evidence that his application for reinstatement was ever approved, whether in 2010 or anytime thereafter. 42.The status of R2’s membership can also be gleaned from what happened at the May 2018 EGM. As R2’s signature was not in the record of attendance, he was asked during cross-examination why he did not attend the May 2018 EGM. R2 said that he did attend but he was asked not to sign on the attendance record as his membership status was unclear. R2 accepted that the reason why he had not signed for his attendance and that he did not stand for any election for any post at the May 2018 EGM was that his membership status in the Association was unclear. 43.It is therefore clear that contrary to his assertion that his membership had been automatically reinstated since 2010, R2’s status as a member as at 2018 was still in question and was still being challenged by some members. 44.Further, R2 had written a declaration dated 20 May 2019 to the Presiding Officer of the Labour Tribunal, stressing that he was not a member of the Association, and hence should not have been sued as a defendant in relation to a claim by an ex-employee, Icy Kwong, in the Labour Tribunal. R2’s explanation was that he only meant to deny that he was a “崇正總會執委會員” and not to deny that he was a “崇正總會會員”. However, the purpose of the letter was clearly to rid himself of any connection with the employment of Icy Kwong. I find R2 to be an unreliable witness who would take a position whenever the situation suited him. I reject his explanation. It was clearly R2’s own stance in 2019 (when the situation called for) that he was not a member of the Association. 45.Leaving aside whether R2’s membership was reinstated, R2 was never a member of the ESC. Hence according to Article 44 of the Old Articles, he was in any event not eligible to have been appointed as the Chief Officer of the General Affairs Section. R2 in his oral evidence claimed that he had been elected as a member of the ESC at the May 2018 EGM. However, this is clearly contradicted by the documentary evidence and his own evidence: Ps and Rs have each produced a lists of persons who allegedly had been elected as members of the ESC at the May 2018 EGM. The names on these two lists are different but R2’s name was on neither version. R2’s assertion that both lists were wrong and that KC and Right Point fabricated these lists is simply incredible and without any basis. Such assertion is also contrary to his own answer that he did not even stand for election on 22 May 2018 due to his questionable status as a member of the Association. I find R2 to be a thoroughly dishonest and unreliable witness. 46.The Investigation Committee, in reaching the conclusion in paragraph 11 of the Investigation Report that R2 was a member since December 2016 did not give any explanation on how R2’s membership was reinstated since that date. It also referred only to the members’ register 2021-2022 showing R2 as a member without examining or investigating why his name was not in the 2018 Register. Its conclusion that R2 was validly elected as the Chief Officer of the General Affairs Section and a member of the ESC did not refer to when and how he was so elected. As shown above, R2 was clearly not elected as a member of the ESC at the May 2018 EGM and thus could not have been eligible to be elected as the Chief Officer of the General Affairs Section. The Investigation Committee simply took the explanation of Rs at face value and accepted their explanation wholesale. I thus find the conclusion reached in paragraph 12 of the Investigation Report to be unsound. 47.Mr Leung and Mr Chan further relied on a version of a purported list of members voted as the members of the 37th EC, and submitted that as R2 was elected as a member of the EC at the May 2018 EGM, he must have been a member as at 2018. This is putting the cart before the horse: if R2 was not a member, he could not have stood for election as a member of the EC. I reject this submission. 48.Further, there were two conflicting versions of the list of EC members elected at the May 2018 EGM that had been presented as evidence. The one relied upon by Ps is a list consisting of 95 EC members (where R2 was not an EC member) (the “95 EC Members List”). The one relied upon by Rs is a list consisting of 63 members, where R2 was a member (the “63 EC Members List”). 49.For reasons that are set out hereinbelow in paragraphs 51 – 54, I find that the 95 EC Members List is the accurate and correct list of EC members elected at the May 2018 EGM. 50.Based on the above, I thus find that R2 was never reinstated as a member of the Association since the revocation in 2007. As such, he could not have been validly elected as a member of the EC/ESC or appointed as the Chief Officer of the General Affairs Section of the Association. (1)(b) Composition of the EC 51.As the composition of the 37th EC (after voting at the May 2018 EGM) was relied upon by R2 in support of his membership status, and there are two difference versions presented at trial, it became necessary to have a factual finding on the issue. 52.It was surprising to hear at trial that there was dispute on the composition of the EC which had been elected at the May 2018 EGM just after the 37th EC took control over the 36th EC. One would have thought that with the lesson learnt from the power struggles that ended up depleting much of the Association’s assets in HCMP 2056/2018, proper procedures would have been put in place for the accurate recording of the result of the election held at the May 2018 EGM. However, as mentioned above, there were different versions for the list of EC members produced at trial. 53.For the composition of the EC elected at the May 2018 EGM, Ps rely on the 95 EC Members List whilst Rs rely on the 63 EC Members List. 54.Given the Association holds substantial amount of assets, it is surprising to find that it does not have a proper system of keeping records on who are the members of the EC, the organ that carries out the executive function of the Association. It is even more astonishing that R1, the Chairman of the Association would deny that the 95 EC Members List is the correct list:
55.I find that the 95 EC Members List was the correct and accurate list of EC members elected at the May 2018 EGM. 56.Together with the doubts raised on the proper approval of the newly admitted members, it is clear that in order to put to rest the disputes as to who are still currently members (and consequently who are eligible to be elected in future to the much coveted posts of EC/ESC members), it would be necessary to have any doubts on memberships investigated and cleared (if appropriate) by a properly elected and functioning EC and ESC. (2) Wrongful Members’ Recruitment 57.The procedure for the approval of new membership applications is set out in Article 7 of the Old Articles, which provides that:
58.Ps challenge that the recruitment and admission of over 200 members in 2020 and 2021 were not in accordance with Article 7 of the Old Articles, in that no EC meeting was convened to approve such new members, which is in breach of Article 7 of the Old Articles. At the same time, recruitment of members by other camps was said to have been made impossible. This is alleged to have been done to strengthen the control of Rs and their camp and to ensure that resolutions will be passed to their liking. 59.I find that the recruitment and admission of 175 members in 2020 and 2021 were not in accordance with the Old Articles as it is not seriously disputed that no EC meeting was held for the approval of these new members. At least, no relevant minutes for such EC meeting had been produced, with no satisfactory reason provided. 60.I also find that R2 had prevented the admission of some selective new members for the following reasons:
61.As the complaint is prima facie made out, Mr Leung then turned to criticise that no particulars had been given by Ps on the identity of these allegedly wrongfully admitted members so that it was impossible for Rs to respond to such allegations. Mr Leung thus submitted that in such circumstances, even if the criticism was valid, it would be impossible for the court to disqualify nearly 200 unknown persons from membership. 62.I agree to a certain extent that granting the relief as sought by Ps for the Wrongful Members’ Recruitment would be difficult, as no sufficient particulars have been put forward. However, after hearing the evidence, the incontrovertible conclusion is that there is no proper system in place for the safe keeping of a current members’ register that is accurate, transparent and reliable. I am of the view that the different versions of the current records of the membership of the Association produced at trial are contradictory with each other and none of them is reliable. In such circumstances, although the relief sought by Ps may not be appropriate or possible, that does not mean no relief ought to be granted, but rather, an alternative relief ought to be granted to address the situation. This will be discussed herein below where reliefs are considered. (3) Wrongful Members’ Removal/Suspension 63.The procedure for the removal of members is set out in Article 11 of the Old Articles, which provides that:
64.Ps allege that the removal of some 102 members had not gone through the procedures set out in Article 11 of the Old Articles in that:
65.For the allegation that there was no sufficient quorum for the requisite joint meetings, WHP’s evidence was that certain of the attendees were not members. However, there were no particulars or elaboration given as to why they were not members of the EC. This allegation therefore is not borne out by the evidence. 66.Ps have also not pleaded who the 102 alleged removed members were. It is also accepted by Ps that when the members’ register was updated, some of the members out of these 102 members were properly removed as they had either emigrated, passed away or given up their membership voluntarily. 67.After clarification with Mr Lau, it seemed clear that the complaint was focused on the removal of P1, P2, WHP, Chan Wan Yuen and CYL, who were all allegedly removed due to misconduct. 68.For CYL and Chan Wan Yuen, Mr Leung and Mr Chan relied on the minutes of a meeting of the EC/SC joint meeting dated 15 January 2021 and submitted that their removal was discussed and resolved. At this point, the new Memorandum and Articles are not yet in effect and there was still a requirement for members to be notified before they can be expelled. 69.The allegation against Chan Wan Yuen at the said meeting was that he had amended the amount on five receipts which he presented for reimbursement purposes and colluded with Icy Kwong in her claim in the Labour Tribunal. There was discussion on whether his membership should be revoked and eventually the resolution was passed by a majority. However, there is no evidence that notice had been given to Chan Wan Yuen for him to come to the joint meeting to explain. 70.The allegation against CYL was that he deliberately placed his niece as the accounting manager of the Association for the purposes of enabling him to take funds from the Association through improper reimbursement. It was also alleged that he had presented receipts for his personal expenses for reimbursement and had caused chaos at the general meeting of the Association. It was resolved by a majority that CYL be removed from the EC but his membership was preserved on that occasion. 71.CYL was eventually removed at an EC/SC joint meeting on 6 March 2021. The allegations against him were that:
72.P1 and WHP were both subsequently notified by letter dated 20 January 2022 to have been suspended of their responsibilities with the Association and were prohibited to enter the premises of the Association due to suspected acts that had been carried out to the detriment of the Association. No resolution of the EC/SC was relied upon for this suspension. 73.About 4 months later, the memberships of P1, WHP and P2 were eventually revoked at an EC/SC meeting on 6 May 2022 for having breached the New Articles. 74.Mr Lau submitted that the removal of P1, P2 and WHP was motivated by Rs’ personal interests as they took place after the present petition was issued and it was thus obvious that they were removed due to the petition. 75.Article 83 of the New Articles provides:
76.The basis for the removal of P1 and P2 was that they had attacked R1 by reason of the Derivative Action and the present petition. The basis for the removal of WHP on the other hand was that she had attacked R1 on the HK$3 million payment. I agree with Mr Lau that as the crux of the respective complaint against P1, P2 and WHP (and the bases for their removal) concern matters that have already been raised in the present petition against Rs, it is questionable if it was appropriate for P1, P2 and WHP’s membership revoked for matters that have yet to be adjudicated by the court. Another member has already queried this and objected to such removal at the 6 May 2022 meeting, but to no avail. 77.Further, the ultimate grounds relied upon for the removal/suspension of CYL, WHP, P1 and P2 relate to the alleged wrongdoings by R1, R2 and R3 in the present proceedings. I am of the view that there was clearly a conflict of interest for R1, R2 and R3 to have advocated for the removal of these members at the meeting on 6 May 2022 on such grounds. On this basis, the complaint of Wrongful Members’ Removal has been made out. 78.Having considered the content and discussions of the various minutes of the ESC meetings and the EC/SC joint meetings on the removal of various members, a clear picture that emerged is that there were all along cross allegations of misconduct raised by Ps’ camp and Rs’ camp against each other. 79.Although the complaint of improper removal of P1, P2, WHP, Chan Wan Yuen and CYL is made out, there seemed to have been some other allegations of misconduct made against P1, WHP, Chan Wan Yuen and CYL. Thus, the proper relief would not be an immediate reinstatement of these members. Instead, other complaints of misconduct made against these members should be properly investigated (if they still wish to have their membership reinstated). (4) HK$5 Million Payment to Right Point. 80.Ps’ case is that R1 falsely represented to the 37th ESC that Right Point was entitled to payment of HK$5 million as their fees for services rendered when in fact no substantial services were provided to the Association before 20 January 2020. It is alleged that the invoice produced in support of work having been rendered was a mere disguise to carry out the Champerty Agreement (as defined below). 81.This payment is alleged to have arisen in this way: R1 and R2, together with CYL, signed an agreement entitled “Confidential Agreement” dated 4 January 2018 (the “Champerty Agreement”) with Kong whereby Kong agreed to bear all legal costs incurred in the litigation between the 36th ESC and the 37th ESC. In the event that the 37th ESC could successfully replace the 36th ESC, R1, R2 and CYL agreed to pay HK$10 million to Kong. Conversely, in the event that the 36th ESC was not replaced, nothing would be payable to Kong and Kong would not be able to seek reimbursement from R1, R2 and CYL for any of the fees that he had paid. It is not disputed that the arrangement as set out in the Champerty Agreement is illegal. 82.R1’s case is that CYL and Yeung Yui Ching (an ex-member of the Association) (“YYC”) introduced Kong to him one day and presented the Champerty Agreement to him. CYL and YYC told him that they needed professional advice to take over control from the 36th ESC. He thus agreed to sign the Champerty Agreement in the interests of the Association, as the Association had not been properly run for 9 years. R1 said that he reluctantly entered into the Champerty Agreement as CYL and R2 had already agreed to it. At that time, he did not know that the Champerty Agreement was illegal and after taking legal advice, it was cancelled without it ever having been performed. 83.However, it needs to be noted that in R1’s statement given for the purposes of the Investigation, the reason for the cancellation of the Champerty Agreement was not due to the receipt of legal advice, but rather, it was unilaterally terminated by Kong: - as the litigation costs for the overturn of the 36th EC kept escalating, Kong demanded HK$18 million instead of the original HK$10 million under the Champerty Agreement. This was not acceded to and the Champerty Agreement was cancelled by Kong. This was also stated in paragraphs 14 – 17 of the Investigation Report. 84.What is curious is that CYL also gave evidence that he reluctantly agreed to sign the Champerty Agreement and only did so because R1 and R2 had already signed it. R2 also gave evidence that he had doubts about the amount involved but signed the Champerty Agreement as R1 and CYL had signed it. All three of them justified their signing of the Champerty Agreement because of: “the majority rules” (少數服從多數). However, if all of their evidence were to be believed, it would seem that there was never a majority to speak of, as none of them was apparently the person in favour of signing the Champerty Agreement to begin with. 85.In any event, there is no dispute that despite the cancellation of the Champerty Agreement, HK$5 million was subsequently paid to Right Point allegedly for services rendered. 86.R1 relied on the following in support of the HK$5 Million Payment to Right Point being genuine payment for services rendered:
87.P1’s evidence was that despite having voted in favour of the payment, she was in fact unwilling to approve the HK$5 million payment. She said that everyone at the meeting felt that the fee was too high but she was afraid to speak up as she would be classified by R1 to be a traitor and her membership would be at risk (which turned out to have been a correct assessment). This is why despite having approved the payment, she had still insisted that R1 set out the reasons for such payment before she co-signed on a cheque dated 21 November 2020. 88.WHP, witness for Ps, gave evidence to the effect that she was also at the EC/SC joint meeting on 21 November 2020. Despite having voted in favour of the payment to Right Point in the sum of HK$5 million, WHP in her oral evidence said that there were heated discussions at the meeting on the amount to be paid. At first she said that no invoice was put forward at the meeting to substantiate the payment. She particularly explained that at that time, she was not aware of the Champerty Agreement. Later, she clarified that the HK$4.75 Million Right Point Invoice was produced at the meeting although she only took a glance and saw the amount without going through the 15-page itemized invoice. WHP further said that at the 21 November 2020 EC/SC joint meeting, the committee members in attendance were told that as R1 had already made a promise to Right Point, the payment would need to be made and anyone who voted against the resolution would be considered as a “traitor”. Upon questioning by the court, WHP admitted that no investigations or enquiries had been carried out by herself or by anyone in the Association. 89.P1 and WHP both said that at the 21 November 2020 EC/SC joint meeting, the Champerty Agreement was not disclosed and they only found out about the Champerty Agreement from CYL later. 90.CYL testified that after the 37th ESC gained control, Kong sent his people to the Association collect his fees. After negotiations between R1 and Kong, it was agreed that Kong would be paid HK$5 million. It is thus CYL’s evidence that the HK$5 million was payment under the Champerty Agreement, and not for services rendered. 91.Although CYL also voted in favour of the payment to Right Point in the sum of HK$5 million, he said he only did so as R1 and everyone else had done so. Although he admitted to have thought that HK$5 million was high, he “reluctantly” (無奈地) agreed, as they had just successfully regained control to the Association and he wanted relations to be cordial. CYL admitted to have no independent thinking whenever he was asked to resolve whether certain payments ought to be made by the Association. He would only follow the lead of R1, who was the Chairman of the EC. It is apparent from his evidence that CYL had no regard to the obligations and duties held as the vice chairman of the EC nor did he appreciate the importance of being bestowed with the power that came with the post of vice chairman and one of the authorized persons to sign cheques for large sums. 92.R1 in his oral evidence admitted that despite the HK$4.75 million Right Point Invoice was presented at the 21 November 2020 EC/SC joint meeting, he had not examined whether the items charged were accurate. At first, R1 tried to downplay his responsibility by saying that he had asked the Financial Section and the Secretary of the Association to look into it. I find this assertion to be incredible, as R1 had not once followed-up whether anyone had actually carried out the alleged investigation. R1 also alleged that he found the HK$4.75 million Right Point Invoice to be on the high side, but he left it to the members to vote as he had no right to vote on the resolution. 93.A document dated 13 January 2021 on the letterhead of Right Point suggests that Kong had received a document from YYC, which would be appropriately destroyed. There is no dispute that this document referred to the Champerty Agreement. 94.The combined effect of the oral evidence of the witnesses is that no one within the Association would normally step out of line and offer any dissenting view to that of the Chairman (R1). The evidence shows that people empowered to attend the EC/SC meetings would just put their hand up in support of resolutions when they were told to do so. The difficulty caused by such actions is that when someone (such as P1) subsequently wished to challenge a particular action, it lies ill in their mouth to do so when they were the ones who had agreed to or approved of such acts. Equally, it would be very difficult for them to shirk responsibility if such actions had caused the Association any loss. 95.What is alarming is that the resolutions at the EC or ESC or SC meetings (at least the ones that had been considered at this trial) were clearly merely used as a formality to give the appearance of legality or legitimacy to the relevant acts with no proper investigation or scrutiny. It is however, clear from all the evidence that no one took their responsibility as a member of those committees seriously. 96.I am of the view that on a balance of probabilities, Ps have proven that the HK$5 million was payment for the settlement of the Champerty Agreement with Right Point for the following reasons:
97.In any event, even if I were wrong on the conclusion that the payment was a settlement for the Champerty Agreement, I have no hesitation in coming to the conclusion that no proper consideration had been given by the EC/SC joint meeting on 21 November 2020 when they approved of the HK$5 million payment to Right Point:
98.I thus find that the HK$5 Million Payment to Right Point was not properly authorized and there was a breach of director’s duties on the part of those who had approved the HK$5 Million Payment to Right Point at the EC/SC joint meeting on 21 November 2020. However, I am of the view that the recovery of this sum should be left to be dealt with in the Derivative Action as this loss had been caused to the Association. (5) Appointment of KC and HK$5 Million Payment to KC 99.I am of the view that the services of KC had been engaged at least by conduct:
100.However, in relation to the payment of KC’s fees, in the same vein as the HK$5 Million Payment to Right Point, I also find that there was no proper authorization for the HK$5 Million Payment to KC:
101.I thus find that the HK$5 million payment to KC was not properly authorized and there was a breach of director’s duties on the part of those who had approved the HK$5 Million Payment to KC at the EC/SC Meeting on 30 April 2021. However, I am of the view that the recovery of this sum should be left to be dealt with in the Derivative Action as this loss had been caused to the Association. (6) HK$3 Million Payment to R1 102.Ps’ case against R1 is that a HK$3 million payment was wrongfully made to R1 purportedly for reimbursement of legal fees incurred in HCMP 2056/2018. 103.There is no dispute that certain members had provided funds upfront to fund the litigation to oust the 36th ESC. At a meeting of the ESC on 16 September 2020, it was resolved that the repayment of such funds plus interest be ratified. 104.However, such ratification must be void for the following reasons:
105.It is clear that whatever authorization that was given by the ESC on 16 September 2020 for the HK$3 Million Payment to R1 must be void in view of the glaring conflict of interest. 106.Despite my factual finding that the HK$3 Million Payment to R1 was not properly authorized, I am of the view that the recovery of this sum should be left to be dealt with in the Derivative Action:
(7) Payments to R2 107.Ps allege that the following payments to R2 were wrongful:
(7)(a) HK$30,000 108.In relation to the HK$30,000 payment, R2’s evidence was that HK$20,000 out of the HK$30,000 was a loan that contributed by R2’s father in 2014 for the HCMP 2056/2018 litigation. The HK$20,000 repayment was not seriously disputed by Ps. The remaining HK$10,000 was interest payment for the HK$20,000, which arrangement was purportedly approved on 16 September 2020 by the ESC. However, as I have found that such resolution was void in paragraph 105 hereinabove, the HK$10,000 interest should not have been paid. This sum should be left to be dealt with in the Derivative Action as this loss had been caused to the Association. (7)(b) HK$8,000 109.In relation to the HK$8,000 legal fees for R2’s indecent assault charge, Ps’ allegation is that this was reimbursed by cash to R2. R2 denied that he had ever sought reimbursement for the HK$8,000. The only evidence relied upon by Ps is a receipt from a firm of solicitors. CYL’s evidence and WHP’s evidence merely asserted that they knew from someone else that the HK$8,000 was reimbursed by way of cash. They therefore have no personal knowledge in relation to such reimbursement. Further, there is no documentary evidence pointing to: 1) payment of HK$8,000 had been made to R2; or 2) that R2 had requested for such reimbursement. I am of the view that this allegation is not supported by cogent evidence and the complaint is not made out. (7)(c) HK$300 daily allowance 110.As for the daily allowance of HK$300, R2 admitted to have received about HK$36,000 in total for having worked for the Association for 5 days a week for around 6 months. The HK$300 per day payment was recorded in the minutes of the 26 June 2020 ESC meeting as having been proposed by R2 himself as transportation subsidy. This seems to again have been resolved in the ESC meeting on 16 September 2020. 111.However, it is difficult to see what was the basis for such approval, as R2 claimed to have been the Chief Officer of the General Affairs Section, which was accepted by him to be a non-paying post. It was also never suggested that R2 was ever an employee of the Association. Further, Article 46 of the Old Articles provided that no member of the EC shall be entitled to receive any remuneration from the Association for his services rendered as such member. Article 4 of the Old Memorandum provides that no remuneration or other benefit in money’s worth shall be given to a member of the Council or Governing Body of the Association or to any office of the Association and only out of pocket expenses and interest not exceeding 12% can be reimbursed to such members. Given it was Rs’ stance that he was at that time a member of the EC, there is no elaboration by those attending these two meetings as to under which article of the Old Articles and Old Memorandum was R2 entitled to be paid HK$300 per day for working at the Association. 112.This is especially so when it is recorded in the minutes of the ESC meeting on 16 September 2020 that other EC members including R1 and P1 all “abandoned” claiming for transportation subsidies from the Association. 113.I am thus of the view that the purported resolution for the HK$300 per day payment was invalid for being in breach of the Old Articles, and should not have been paid. This sum should be left to be dealt with in the Derivative Action as this loss had been caused to the Association. (7)(d) HK$25,000 114.In respect of the HK$25,000 payment received by R2, the cheque numbers set out in the reimbursement voucher submitted by R2 dated 31 December 2020 correspond with the cheques issued to R2 for a total of HK$25,000. It is R2’s evidence that this HK$25,000 payment was ultimately received by him in cash instead. 115.The reimbursement vouchers submitted by R2 dated 7 May 2020 and 31 December 2020 both show that he was the person who approved his own application for reimbursement. R2 could not provide any justification on why such reimbursement vouchers were not submitted to the relevant head of Financial Section at the time for approval. Such “self-approval” clearly constitutes a conflict of interest. During his oral testimony, R2 admitted that to have been in the wrong and offered to “pay back” the Association. 116.The Investigation Report simply accepted R2’s case that the reimbursement was for the Association’s affairs without noticing that R2 had approved his own submission for reimbursement instead of submitting it to the Financial Section for approval. I place no weight on the conclusion reached in the Investigation Report. 117.The loss caused by such improper reimbursement again belongs to the Association and ought to be pursued in the Derivative Action. Of course, that may not be necessary if such loss is voluntarily made good by R2, as he had indicated in court. 118.Quite apart from financial loss caused to the Association, the fact that such payments were made to R2 calls into question what sort of safeguards or procedures (if any) were in place so that reimbursements would only be made in proper circumstances after verification. (8) HK$6.1 Million Payment to R1 119.Ps claim that Rs had wrongfully caused the Association to pay HK$6.1 million into the personal account of R1 under the guise of lending such money to the School. It was claimed that there was no reason why the funds could not have been put into the bank account of the School directly, and as such, this was one way for R1 to siphon off money to himself. Mr Lau also submitted the resolution on 17 March 2021 purportedly approving such a loan to the School was invalid. 120.R1’s case was that the HK$6.1 million loan was duly approved by the Association for meeting the expenses of the School incurred prior to March 2021. 121.There is no dispute that the 37th EC has yet to gain control over the management of the School, which is still under the control of the 36th EC. Litigation over the management of the School is still in progress in HCA 516/2021. As a result, the bank account of the School is still under the control of the 36th EC. 122.R1’s evidence was that in order to pay the expenses for the running of the School, including the monthly salary of Tung, the School’s principal (HK$41,500), and R4, the secretary (HK$21,000), a loan from the Association was necessary. A new company, Tsung Tsin Middle School (Mgt) Co Ltd was incorporated to receive the loan for the School. Before its incorporation however, R1 was holding the loan on trust for the School. 123.It is not disputed that out of the HK$6.1 million, HK$4.97 million had been transferred by R1 to Tsung Tsin Middles School (Mgt) Co Ltd. The rest of the HK$1.1 million had been used for paying the expenses of the School and to fund the litigation over the control of the School. Given it is the Association’s stance that control over the School needs to be regained, there cannot be much challenge to the litigation expenses incurred. 124.Mr Lau submitted that the resolution on 17 March 2021 was forged and there was no such meeting authorizing the payment, on the basis that the resolution had referred to HCA 516/2021 but HCA 516/2021 was not yet commenced as at 17 March 2021. 125.Although HCA 516/2021 was not yet commenced on 17 March 2021 (it was only commenced on 1 April 2021), I do not think that that alone is sufficient to support the allegation that the minutes were forged, as it might have been possible that the minutes had been prepared subsequently and backdated. 126.In any event, the crux of this complaint is misappropriation, rather than lack of authorization for the HK$6.1 million loan. WHP, who was present at the meeting on 17 March 2021, admitted in her oral evidence that R1 was holding the money on trust for the School as a trustee. 127.The propriety of how much was spent and whether such spending was supported by proper receipts was not pleaded as part of the complaint and as such it would not be appropriate for the court to deal with it when evidence is lacking. 128.I am of the view that the complaint in relation to the HK$6.1 Million Payment to R1 is not made out. (9) Payments to R4 129.Ps’ complaint under this head is two-fold: 1) a HK$100,000 bonus was alleged to be wrongfully paid to R4 and 2) the fact that despite already being an employee of the Association and earning a monthly salary, R4 was additionally employed as a secretary of the School, earning an additional salary. 130.I am of the view that Ps have failed to prove that the HK$100,000 bonus payment to R4 was wrongful or unfairly prejudicial:
131.As to R4’s additional role as a secretary of the School, I am of the view that Ps have failed to prove that such payment of salary was wrongful or unfairly prejudicial:
J. APPLICABLE PRINCIPLES – UNFAIR PREJUDICIAL CONDUCT 132.Having made the necessary factual findings in respect of each of the complaints, I now turn to whether such conducts, if found to be wrongful, amounted to unfair prejudice enabling Ps to obtain relief. 133.It is provided in section 724(1) of the Companies Ordinance (Cap. 622) (the “CO”) that: “The Court may exercise the power under section 725(1)(a) and (2) if, on a petition by a member of a company, it considers that—
134.The scenario in the present case does not concern a dispute between shareholders but rather, a complaint by members of the Association of breaches of something akin to a director’s duties and mismanagement by R1, R2 and R3. It is against this context that we need to examine the alleged unfair prejudice. Unfairness 135.“Unfairly prejudicial” is deliberately imprecise language. They are general words and should be applied flexibly to meet the circumstances of the particular case: Re Saul D Harrison & Sons plc [5]. 136.The meaning of “unfairness” is summarised in Hollington: Shareholders’ Rights [6] as follows:
137.The principle is best expounded by Hoffmann LJ (as he then was) in Re Saul D Harrison & Sons plc [7] :
138.Lord Hoffmann repeated the same point in O’Neill v Phillips [8] :
Prejudice 139.“Prejudice” includes both damage to the financial interests of the members such as where the value of the shareholding is diminished or jeopardized, as well as damage to other interests of members in their capacity as members, such as infringement of their rights under the constitution or damage to other interests which would be protected pursuant to equitable considerations: Law of Companies in Hong Kong [9]. 140.The prejudice must be to the petitioner in his capacity as a member but it need not be financial in character. A disregard of the rights of a member as such, without any financial consequences, may amount to prejudice falling within the section: Joffe: Minority Shareholders [10], at §§6.77 – 6.80; Hollington, at §§7-68 – 7-78. Affairs of the company 141.The words “affairs of the company” are extremely wide and should be construed liberally. The phrase embraces all aspects of the company’s affairs and business. It includes the company’s goodwill and assets, and encompasses both external corporate activity and internal management: Joffe §6.29; Law of Companies in Hong Kong, at §10.142. Breach of director’s fiduciary duties 142.A breach of the fiduciary duties owed by a director to the company may form the basis of an unfair prejudice claim. As explained by Hoffmann LJ in Re Saul D Harrison [11] :
See also Re Asia Television Ltd [12]. 143.Therefore, misappropriation of the company’s assets, which amounts to a breach of a director’s fiduciary duties, constitutes unfairly prejudicial conduct: see Re Elgindata Ltd[13]; applied in Re Tai Lap Investment Co Ltd [14]. K. FINDING ON UNFAIR PREJUDICE AGAINST THE VARIOUS PLEADED GROUNDS 144.I find that unfair prejudice is proven for the following matters based on the factual findings and reasons set out herein:
145.Whilst it might be said by Mr Leung that each individual wrongdoing may not amount to unfairly prejudicial conduct, I am of the view that based on my findings of the various wrongdoings alleged, a clear picture of gross mismanagement emerges: there were no proper scrutiny of outgoings, even when the amount is large; various members of the EC or ESC, including the Chairman, could procure the approval of payments to themselves personally; no proper procedure in ensuring an accurate members’ register was maintained, no proper procedure being in place or adhered to for the admission of members etc. Having seen and heard the totality of the evidence it is apparent that the management of the Association is in shambles. I am therefore of the view that reliefs ought to be granted for such mismanagement, which amounts to unfair prejudicial conduct. 146.Whilst it may be said that relief may not be available to P1 due to the fact that she had voted in favour of at least: i) the HK$5 Million Payment to Right Point, ii) the HK$3 Million Payment to R1; and such conduct cannot be said to be unfair to her, no such criticism can be made against P2, who had not voted in any of the matters. Thus, P2’s entitlement to relief is not affected. L. NON-INTERFERENCE WITH RESOLUTIONS PASSED IN MEETINGS 147.R1, R2 and R3, together with the members of the EC/ESC and the SC seemed to have been under the misguided concept that so long as there is a record produced for a unanimous resolution on a certain issue, such matter/issue will become invincible, even if it was done without any proper basis. 148.Indeed, Mr Leung relied heavily on the fact that the matters complained of had been approved and passed in the various EC/ESC meetings as set out in paragraph 21 hereinabove, and submitted that the court is bound by the effect of such resolutions and any wrongdoings had been ratified. 149.Mr Leung further argued that as Ps have not pleaded for the relevant resolutions to be nullified, the court should not challenge the results of these meetings. 150.Whilst it is accepted that an allegation in an unfair prejudice petition needs to be pleaded before the court will entertain it, there is no bar to the court’s power to:
151.Insofar as it is argued by Mr Leung that the court cannot interfere in the complained matters by reason of the due approval by the EC/ESC, I have already set out above why the relevant resolutions were either void for breaching the Old Articles and Old Memorandum or for glaring conflict of interest. I do not understand Mr Leung to be advocating that such resolutions would in those circumstances be still binding on the court, thus barring the court’s right to interfere. M.LIABILITY OF RESPONDENTS 152.Having made the factual findings hereinabove, it is apparent that R1 – R3 had been involved in most, if not all, of the wrongful conducts and are thus liable for them. R4 however is a mere employee who, on the available evidence, is not involved in the management or decision of the Association and should not be responsible for the unfair and prejudicial conduct. 153.Mr Leung highlighted the fact that R1, as the Chairman of the Association, had always abstained from voting on all the matters complained of, as if suggesting that therefore, he has no responsibility in the matters that were presented for resolution. 154.It is trite that any director of a company, let alone the Chairman, is in a fiduciary position and as such must remember that he must conduct a meeting not for his own benefit, but for the benefit of the company as a whole. He is therefore expected to act at all times in good faith and for proper purposes. 155.One would expect a Chairman to at least raise for the consideration of those who are entitled to vote at an EC/SC meeting why certain resolutions might be challenged, or problematic for reasons such as apparent conflict of interest or breach of the articles of the Association. 156.Instead, R1 had time and again during the course of cross-examination given the excuse that although he had found certain resolutions to be problematic and not in the interest of the Association, he, as the Chairman was powerless and just let those with the power to vote to decide. I reject any suggestion that R1 can hide behind the fact that he is the Chairman to abdicate his duty as a fiduciary of the Association when resolutions presented to be passed are potentially against the Association’s interest. N. APPLICABLE PRINCPLES - GRANTING OF RELIEF 157.Under section 725 of the CO, the court has wide powers to make any order that it thinks fit for granting relief. The court will seek to provide a remedy that is a fair and equitable way of putting right for the future for the unfair prejudice suffered. In framing the remedy, the court is entitled to consider the entire circumstances of the case and have regard to the interests of the company as a whole[15]. 158.The court has jurisdiction to make orders against directors where they are so connected to the unfairly prejudicial conduct that it would be just to grant a remedy against them in relation to that conduct[16]. 159.Once the court has decided to grant relief, it can include in its order any terms which it thinks appropriate in respect of the matters of which complaint has been made[17]. The remedy must relate to the petitioner’s interests as a member of the company and to matters which are in dispute between the parties[18]. 160.I bear in mind that the remedy must be proportionate to the unfair prejudice found. The court is not limited only to making orders that the petitioner seeks[19]. 161.The court must assess the appropriateness of any particular remedy as at the date of the hearing and not as at the date of presentation of the petition, and may take account of conduct between those dates; indeed, the court is entitled to look at the “reality and practicalities” of the overall situation, “past, present and future”[20] 162.If a court were to make any order regulating a company’s affairs, it should consider a bespoke solution, at least in cases where it does not risk aggravating an existing dispute[21]. 163.In my view, it is important to take the present Petition in its overall context – the overall complaint of Ps is that the Association is being mismanaged under the current EC/ESC, which is controlled by R1 – R3. This will be a relevant factor in the determination of the appropriate reliefs, if any were to be granted. O. RELIEF 164.As found and discussed above, in these present proceedings relief will be granted for: 1) R2’s Appointment, 2) Wrongful Members’ Suspension/Removal and 3) Wrongful Members’ Recruitment. 165.I am of the view that to cater for the situation and present circumstances of the Association, reliefs alternative to those that had been pleaded should be granted. As parties have not yet had the opportunity to make submissions on these alternative reliefs, I have set them out below in paragraphs 166 – 173 and would grant them on a nisi basis. Parties should indicate within 14 days of the handing down of this Judgment of any comments that they might have. If necessary, a hearing will be fixed for submissions on the alternative reliefs. R2’s Appointment 166.As I have found that R2’s membership has not yet been reinstated, he could not have been appointed as a member of the EC or even less so, the Chief Officer of the General Affairs Section of the Association. 167.The appropriate relief for R2’s wrongful appointment would thus be a declaration to the effect that:
Wrongful Members’ Suspension/Removal 168.Other than the relatively uncontroversial removal of those members who had passed away, emigrated or voluntarily resigned, the rest of the proposed removal/suspension of members (in particular, that of WHP, P1, CYL) ought to be scrutinized by a properly constituted EC/SC joint meeting, in accordance with the regulation in the Articles of the Association. Wrongful Members’ Recruitment 169.Similarly, the admission of new members in 2020 and 2021 (whether in the number of 175 or otherwise) ought to be scrutinized and if appropriate, approved by a properly constituted EC in accordance with the Articles of the Association. Proper Keeping of a Members’ Register 170.There is currently no proper system in place for the keeping of a current record of the membership of the Association. This had contributed to at least some of the wrongful conduct. Different registers of memberships of the Association tendered at trial had been prepared by different people, in different formats. Some of these registers are yearly records, while some purport to be a composite record for 3 years. Neither Ps nor Rs could provide any legitimate source to the version of the members’ register relied upon by them respectively. As such, none of the members’ register tendered is reliable as no provenance was provided. 171.Similarly, after the EC members and ESC members had been elected at the May 2018 EGM, there is no clear evidence presented by either of the parties as to which of the EC/ESC members had since then resigned, removed, or otherwise disqualified or whether new appointments had been properly approved to replace them. There was certainly no definitive and authoritative list of the current members of the EC/ESC presented as evidence. I am thus unable to determine what was the composition of the EC/ESC as at the relevant times when various resolutions were purportedly passed. As a result, insofar as Ps allege that certain resolutions were inquorate due to an insufficient number of EC/ESC members being present at various meetings, such allegation has not been borne out by the evidence. 172.I thus consider the following to be necessary steps to be taken for the Association and as reliefs in order for it to continue its operation:
173.As I have already found that R1, R2, R3, P1, WHP and CYL have breached their duties as members of the EC/ESC, they should refrain from exercising their powers as members of the EC/ESC (if they are recorded as such members). P. COSTS 174.I order on a nisi basis that:
Such costs are to be taxed, if not agreed, with certificate for 1 counsel. 175.For the avoidance of doubt, as R1, R2 and R3 have been found to be liable for mismanagement, the costs payable by them to P2 and their own costs should not be borne by the Association. This is also on a nisi basis.
Mr Roland Lau, instructed by C.Y. Tsang & Co, for the 1st and 2nd Petitioners Mr Adrian Leung and Mr Sunny Chan, instructed by K.C. Ho & Fong, for the 1st to 4th Respondents Attendance of the 5th Respondent was excused [1] HCMP 2056/2018, which subsequently went on appeal. [2] In re London School of Electronics Ltd. [1986] Ch 211 at 222 B to C [3] Unreported, HCA 1734/2009, 8 April 2014 [4] Unreported, HCA 3523/2002, 13 August 2005 [5] [1994] BCC 475, 488C (Hoffmann LJ) and 499C (Neill LJ) [6] (8th ed, 2017), pp 143 – 145, §§7-01 – 7-06 [7] Supra, at 488G [8] [1999] 1 WLR 1092 at 1101F. [9] (2nd ed, 2016), §10.152 [10] (5th ed, 2015) [11] Supra, at 488H. See also Neill LJ at 500C. [12] [2015] 1 HKLRD 607 at §53 [13] [1991] BCLC 959 at 1004g [14] [1999] 1 HKLRD 384 at 393E [15] [725.02] Butterworths Hong Kong Company Law Handbook [16] [6.284] Minority Shareholders – Law, Practice, and Procedure 5th Ed. [17] [6.285] supra [18] [8.3820] Palmer’s Company Law [19] [6.288] supra [20] [6.290] supra [21] [6.292] supra |
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