Lee Chee (or Tse) Ngor, Moreta v. The Prudential Enterprise Ltd
Read the full judgment text of HCMP 187/1991 on BabelCite. This High Court CFI judgment was delivered on 16 September 1991.
1. This is an application under section 69(1B) of the Companies Ordinance, which was introduced by amendment in August 1984 and provides:-
Cited by 3 cases
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HCMP000187/1991 HEADNOTE Company Law - transfer of shares - right of pre-emption - Section 69(1B) Companies Ordinance.
IN THE SUPREME COURT OF HONG KONG HIGH COURT MISCELLANEOUS PROCEEDINGS ____________
____________ BETWEEN
____________ Coram: The Hon. Mr. Justice Sears in Chambers Date of Hearing: 16 September 1991 Date of Delivery of Judgment: 16 September 1991 Date of Handing down Judgment: 11 October 1991 ___________ JUDGMENT ___________ 1. This is an application under section 69(1B) of the Companies Ordinance, which was introduced by amendment in August 1984 and provides:-
2. The factual background is as follows - the plaintiff is the administratrix of LEE Chai-yun who was the registered owner of 180 shares in the defendant company. He died on December 11th 1978 but left no will. The plaintiff, his widow, took out letters of administration on December 11th 1979. There has been considerable dispute between the plaintiff and defendant over the dividends payable under the shares and as to whether the plaintiff could become the registered owner of them. The details as set out in the affidavit of Anthony Liu, the plaintiff's solicitor. 3. In October 1990 the plaintiff as personal representative transferred the shares to herself and by a letter dated October 2nd indicated that the transfer was pursuant to Article 36(g) of the Articles & memorandum of Association. The defendants refused to register the transfer and declined to give any reasons. Later, in an affidavit of Patrick LEE a director of the defendants, the reason given was that the transfer was not within Article 36(g) but within (f) which contains a right of pre-emption. 4. The legal background to the transfer of shares can be shortly stated. On the one hand, it is generally to the benefit of the company that its shares on freely transferable - see Lord Greene M.R., Re Smith & Fawcett (1942) 1 Ch. at p. 306 & Harman L.J. in Re Swaledale Cleaners Ltd. (1968) 1 WLR at p. 1715. 5. However, it is a common restriction on the transfer of shares found in a private company that a member who wishes to transfer must first offer them to the other members of the company. There is no doubt about the validity of such a right of pre-emption. 6. The articles of association which are relevant here are:-
7. It can be seen therefore from the structure of Article 36 that unless the transfer is a result of a sale, any other disposition has a right of pre-emption. Such a person in (f) is entitled to shares either by virtue of the death or bankruptcy of the member but must offer them to the other members. Sub-para. (g) is an exception to the rule for pre-emption. 8. The plaintiff made her application to transfer as she said she fell within (g) and Mr. Chan submits that the construction permits both living and dead members to transfer. It seems to me that (g) is dealing with a transfer 'inter vivos' or a bequest. This is made clear by the words "and in the case of such bequest etc." 9. Although the plaintiff is a family member I am in no doubt that a transfer from the personal representative of the member to the plaintiff does not fall within sub-para. (g). 10. Mr. Chan, however, prays in aid s. 67 of the Companies Ordinance which validates a transfer by a personal representative. This does not, in my judgment, extend the meaning of the word "member" in (g). 11. I therefore conclude that the transfer from the plaintiff as administratrix to herself is not an exception to the general rule of pre-emption. 12. I have sympathy for the palaintiff who says that she is really in the same position as if her husband had bequeathed the shares to her, but the short answer is that he left no will and the shares vested in the personal representatives. 13. They can effectively dispose of shares, as can a trustee in bankruptcy, and it so happens that the disposal is to a person who falls with the definition of family member, but this does not permit that third person avoiding the provisions of sub-para. (f). 14. Mr. Chan further submits that even if (g) does not apply the Company are wrong in saying that the plaintiff became entitled to her shares by virtue of the member's death. It may be taking too simplistic a view to say that the only entitlement of the plaintiff to these shares was a direct result of the death of her husband. They vested first in the personal representatives who clearly if they sought to transfer would have had to offer them to the existing members. It would be most unusual if a third party could be in a better position as transferee, than the transferor was. 15. Mr. Chan submits that at the time of the plaintiff's application, both beneficial and legal interest in the shares had passed and therefore the personal representatives had no longer any beneficial interest in the shares. 16. The general position of personal representatives is set out in Palmer's Company Law at 40-35 and their duties are found in s. 62 of the Probate and Administration Ordinance. 17. Personal Representatives are able to convey both legal and beneficial interest in shares. In my judgment, sub-para. (f) does apply. 18. Mr. Chan finally submits that s. 69(1B) permits me to exercise a discretion wider than that contained in the court's power to make an order for rectification of the shareholder's register, and that I can over-ride the refusal to register because the spirit of the Articles is not to object to family members. 19. It is not suggested that the defendants have in any way acted from an improper motive. 20. Section 69(1B) uses the words "well founded" and having considered all the facts and the principles of law, I am not satisfied that this application is well founded and I dismiss it.
Representation: Mr. Edward Chan, Q.C. and Mr. K.L. Lui instructed by S.H. Leung & Co. for the Plaintiff. Mr. Robert Tang, Q.C. and Miss Margaret Chew instructed by Herbert Smith for the Defendant. | ||||||||||||||||||||||||||
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