Long Lead Investments Ltd v. Vlink Global Ltd and Others

HCA010512/2000

HCA 10512/00

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10512 of 2000

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Coram: Hon Yuen J in Chambers

Date of hearing and decision: 19 December 2000

Date of reasons for decision: 20 December 2000

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REASONS FOR DECISION

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1. This is a brief note of the reasons for my decision last night refusing an urgent application made ex parte on notice by the Plaintiff for an order that the 1st Defendant Company and its directors be restrained from proposing or putting to vote any resolution at any board of directors meeting committing the Company to the proposed or any investment by the Company in the mvpc vLink Venture Fund ("the Fund") until the final determination of a Summons to be taken out or 7 working days after the Company has supplied to the Plaintiff all relevant documents and information in respect of that Fund pursuant to a request of the Plaintiff made or to be made on before 20 December 2000 whichever is earlier.

2. The Plaintiff is a shareholder in the 1st Defendant Company which is a public company. The public holds about 25% of the shares.

3. The Plaintiff is represented on the board by 1 director, Mr Fung. A shareholder with which for present purposes it is allied is also represented by 1 director, Mr Sousa.

4. It is said that the 2nd and 3rd Defendants are directors representing another camp of shareholders. It is alleged that Mr Lee the 5th Defendant is no longer representing a large Korean shareholder, although that is denied by Mr Lee.

5. Mr Philip Wong and Mr William James Lalonde are independent directors approved by the Stock Exchange

6. The background to the application is that on Saturday afternoon (16 December 2000) I had on another urgent ex parte application made by the Plaintiff, given an injunction restraining the Defendants from proceeding with certain resolutions concerning certain other investments, on the ground that there had been inadequate notice for the board meeting. There has been no application for discharge of that order.

7. On that occasion, the Plaintiff also sought an order seeking to restrain the Defendants from holding a board meeting on Monday 18 December 2000 regarding investment in the Fund. Notice of that meeting had been given on 14 December 2000.

8. I refused the application on the ground that the Plaintiff had not even taken the basic step of writing or contacting any of the Defendants to discuss any need for a postponement of the meeting.

9. On Sunday afternoon (17 December 2000), the Plaintiff made another urgent ex parte application with a new affirmation exhibiting correspondence showing that at least some of the Defendants were indicating that they would press on with a meeting to resolve on investment in the Fund on Monday morning (18 December 2000) at 10:00 a.m. without allowing time for further discussion.

10. On that basis, I gave an order that the Defendant Company and its directors be restrained from proposing or putting to vote any resolution at the board of directors meeting to be held on 18 December 2000 (Monday) and convened by notice dated 14 December 2000 committing the Company to the proposed or any investment by the Company in the Fund.

11. The order was in terms that the board was not to pass any resolutions committing the Company at the meeting to be held on 18 December 2000. Since the ground for the application was unreasonably short notice between 14 December and 18 December 2000, that order should not be read as if it included any extension of the injunction to any adjournments of the meeting to any later dates.

12. Late yesterday afternoon (Tuesday 19 December 2000), the Defendants sought a discharge of my order of 17 December 2000. In light of the matters set out in the preceding paragraph, I considered the order spent. Mr Bleach SC therefore did not proceed with his application.

13. Mr Poon SC then made an urgent application in terms set out in the first paragraph of this decision. After hearing argument, and in the exercise of my discretion, I refused to accede to the application. I considered that it would be an unacceptable breach of the principle of judicial non-interference with the management of companies for the Court to grant, as it were, a quia timet injunction on the application of the Plaintiff, a shareholder, restraining the board of directors from exercising their powers and duties in anticipation of a board meeting, when on the affirmation evidence, further matters will be orally presented to the board. There is now affirmation evidence not only from the directors representing the "opposing camp" but also the independent directors indicating that further oral presentations will be made and received at the meeting, and a decision (which may be for or against the resolution) would then be made.

14. Notwithstanding Mr Poon's submissions at the hearing, I was not persuaded that the evidence before me showed any abuse of powers or breach of fiduciary duties by the independent directors, ignoring for the moment consideration of the other directors. The composition of the board is such that the independent directors hold the ring, and they have stated on affirmation that they would consider all matters that will be presented at the meeting and decide accordingly. There is no evidence that these independent directors are "in the pocket" of any party, and it must therefore be presumed that they are aware of their duties to act in the best interests of the Company. In the premises, I refused the application.

Representation:

Mr J Bleach SC instr'd by Herbert Smith for D2, D3, D5 and Fred Kan & Co for D4 and D6

Mr W Poon SC & Mr P Ng instr'd by Fairbairn Catley Low Kong for P

Remarks:
Appeal by the Plaintiff to the Court of Appeal. Appeal dismissed. Please refer to the Appeal Judgment CACV001073/2000.