John Phillips Goldie v. Grandtag Financial Consultancy & Insuracne Brokers Ltd
Read the full judgment text of HCMP 23/2006 on BabelCite. This High Court CFI judgment was delivered on 20 April 2006.
1. The applicant is one of several shareholders and, for the meantime, a director of the respondent. He used to be of Hong Kong but now lives in England. The respondent carries on business as the name suggests of financial consultants and insurance brokers, under the stewardship of the major shareholder Jameson Leung.
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HCMP 23/2006 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 23 OF 2006 ____________
____________ BETWEEN
____________ Before: Deputy High Court Judge Gill in Chambers Date of Hearing: 3 April 2006 Date of Judgment: 20 April 2006 _______________ J U D G M E N T _______________ 1.The applicant is one of several shareholders and, for the meantime, a director of the respondent. He used to be of Hong Kong but now lives in England. The respondent carries on business as the name suggests of financial consultants and insurance brokers, under the stewardship of the major shareholder Jameson Leung. 2.There has been a falling out, and these proceedings. On 5 January last the applicant filed an originating summons seeking various orders against the respondent, thus :
3.As soon as they had filed, the applicant’s solicitors sought an urgent hearing of the summons. They were given 2:30 p.m. on the same day before the Duty Judge. At 12:30 p.m. the applicant telephoned Mr Leung of the respondent, who happened to be in China on a business trip, informing him of the application and of the appointment, but declined to tell him what it was about. At or about the same time Mr Giles of the applicant’s solicitors telephoned the company’s office and spoke to Mr Lau, also a director. At 1:10 p.m. the application and a supporting affidavit of the applicant were served on the respondent’s registered office. 4.In the event, there was no appearance for or on behalf of the respondent and the matter proceeded in its absence at the appointed time of 2:30 p.m. 5.Following consideration of the issues the Judge made orders in terms of paragraphs 2, 3, 5 (being an alternative to paragraph 4) and paragraph 6. This was thus an order in terms of the originating summons with only one matter held over; that of costs. He ordered these to be reserved. 6.Lest it be suggested (as it has been) that this was an interlocutory application, it was not. There was no separate summons. There was no return date asked for or given. There was no proffering of an undertaking in damages. There was no or scant heed paid to the practice directions in PD11 1/7. 7.The last sentence of the applicant’s affidavit in support reads :
And that is what he got. 8.The application now before me is by the respondent seeking a discharge of the orders. Jurisdiction lies in O. 32 r. 6 RHC which states that :
9.Why did the applicant take the action he did? I come to that next. History 10.The respondent which I shall call from now on Grandtag or the company was incorporated and began to do business in 1999. As at 2005 its shares were held in various percentages by Mr Leung who held the most, the applicant John Goldie, and three other investors Raymond Lee, Edward Lui and Michael Tam. The directors were Messrs Leung and Goldie and a third non-shareholder called Lau Kam Chuen. 11.Day-to-day management of the business of Grandtag at all material times has been undertaken by Mr Leung. As I understand it Messrs Lee, Lui and Tam played no significant part. Mr Goldie has been playing a limited role for which he has been paid a salary and the cost of attending regular directors’ meetings in Hong Kong. 12.Mr Goldie in his affidavit filed in support of the summons said that in early 2005, Messrs Lee, Tam and Lui expressed concern at the way Grandtag was being run and the paucity of information that was being disclosed to them as members. This persuaded him to call for an independent review of the accounts and books by a firm of chartered accountants, Baker Tilly; they completed a report in May 2005. Mr Goldie learned from the report that there were various entries in the accounts which he said warranted an explanation by Mr Leung. And overall, whilst the turnover for 2004 was a satisfactory $64 million plus, he was concerned that the overheads exceeded that figure so that a net loss was posted. 13.He went on to depose that having been resident in the UK and thus away from Hong Kong for most of the time, he had been content to leave Mr Leung in effective sole charge. But since the report he has became concerned about protecting his financial stake in Grandtag. In that regard, having come to Hong Kong, he had his solicitors write to Grandtag, for the attention of Mr Leung, by letter of 28 December 2005, requiring that he be allowed to inspect the company’s books of account and other formal company documents as spelt out in the letter by 10 a.m. the following morning. 14.On the same day he received an email in response from Tim Lit, the Administration and Accounting Manager, that Mr Leung was on leave until 3 January 2006. Further, that the office was under renovation and that the material Mr Goldie was asking for access to was packed away; thus, under the circumstances, it would be extremely difficult to furnish his request as at the following day. 15.Notwithstanding, Mr Goldie did attend at the office the next day. The day after that his solicitors wrote again, complaining their client’s requested access to the various documents and accounts and so on had been denied; that the company was in “flagrant breach” of various provisions of the Companies Ordinance. They wrote :
The letter gave notice that he would make another attempt on 4 January to exercise his right of inspection. 16.By the same date 30 December Grandtag responded :
17.Meanwhile, another difficulty had emerged. The shareholders Lui, Tam and Lee had combined to sell their shares to one Lam Ping Chun. With approval by the directors necessary to validate the transfer the directors were notified of a directors meeting scheduled for 5 December 2005 at 9:30 a.m. Mr Goldie was notified, or purportedly so, by having notice of the meeting emailed to him, in England, on 30 November 2005. 18.Mr Goldie claims to have been particularly concerned about this, given the unsatisfactory features of the Baker Tilly report, and the prospect that three independent members were to be replaced by someone called Lam who for all he knew was a nominee of Mr Leung. Having received the email, he requested that the meeting be deferred to the afternoon of 5 December so that, allowing for the time difference, he could attend by telephone conference. 19.He claims this request was ignored; in the event the meeting proceeded on time without him; the minutes revealed that the transfer of all of the shares of Messrs Lui, Lee and Tam were approved. Two of the directors, Messrs Leung and Lau were marked present. He, Goldie, was marked absent. 20.So it was that in his solicitors’ letter of 30 December complaining of the denial of access to the books of account and so on, he got them to write :
21.The point of that was his contention, presumably on advice, that email notification was not valid. 22.The response by Grandtag of 30 December was to put on record that the directors meeting had been properly convened and resolutions were passed; that the allegation was unfounded and unfair. 23.This is the email which Mr Goldie received : “GRANDTAG
24.There was a further development, in the shape of another email. It exhibited a notice of an EGM of the company to be held on 7 January 2006, called for the purpose of giving consideration to a special resolution removing Mr Goldie as director of the company “with immediate effect”. Mr Goldie does not depose to the date of receipt, only that he received it. However, it is dated 9 December and there is nothing to indicate he did not get it on that date. 25.This gave rise to a further letter from his solicitors of 3 January 2006 to the effect that he had not received notice as a shareholder in accordance with the Companies Ordinance, Table A and the Company’s Articles of Association, demanding that the EGM be cancelled, failing which :
Thus again the validity of notice by email was put into contention. 26.The response of the same date stated in part :
27.The notice sent out was in the following form :
28.Mr Goldie’s originating summons followed and so the various orders were made, in terms I have already set out at the beginning of this judgment. Grandtag’s Response 29.By its application before me Grandtag asserts that Mr Goldie failed through his evidence and counsel to bring to the Judge’s attention material facts and considerations; that the proceedings being ex parte denied it the opportunity to be heard; that the hearing was an abuse of the process of the court. The Applicable Principles 30.First and foremost is the cornerstone premise that before a court reaches any decision in a conflict between litigants both sides should have the opportunity to propound their arguments. Only in the most urgent of cases should an order be made ex parte. And in those exceptional cases where urgency is the watchword the order made should be provisional, giving the judge the opportunity to revisit the issues in the light of further evidence and argument provided by the opposing party. It is therefore entirely contrary to justice that a party should be subjected to a permanent injunction brought on an ex parte basis. 31.It follows that in those exceptional circumstances, it is incumbent on the applicant to put forward all material and relevant facts to assist the judge to undertake the necessary balancing exercise as to whether to grant, decline or defer the application. 32.In the case of Kilgour v Mauro, unreported, 20 April 2000, the British Columbia Court of Appeal stated :
33.In WEA Records Ltd v Visions Channel 4 Ltd [1983] 1 WLR 721, Sir John Donaldson MR said :
34.In Taylor v Burgess [2002] Fam. LR 167 Barrett J said, in a case in which injunctive relief was sought ex parte, in probate, against a person referred to by him as the mother :
35.Thomas Bingham MR held in TRP Limited v Thorley, unreported 13 July 1993 :
36.Finally, I reproduce a passage from Gee’s Commercial Injunctions, 5th edition at 9.003, where the author deals with ex parte applications :
Ex parte or Not? 37.Mr Chan, who represented the applicant before me, submitted that the order was not made ex parte. He said the letter of 28 and 30 December gave notice that there would be an action because of the company’s failure to comply. And there was notice on the day of the hearing, by telephone to the company’s managing director, and service which preceded the hearing. 38.I do not accept there was notice; at least not notice having any practical value. 39.A threat before action is not notice of the action. And the telephone calls and service were far too late to give Grandtag the opportunity to engage its lawyers and attend. 40.The hearing was ex parte. 41.Was there a need to go before a judge ex parte? 42.Was there material non-disclosure? 43.I come to these matters next. Notice of Meetings 44.Central to Mr Goldie’s claim for injunctions were his complaints that the notices of the meetings held on 5 December and to be held on 7 January were irregular. 45.That of 5 December was a directors’ meeting, called for the purpose of considering for approval the transfers of shares. 46.In his supporting affidavit, Mr Goldie does not explain why notice of this was irregular, save that his request for a meeting by telephone conference was apparently ignored. 47.Mr Chan, who also represented him at the ex parte hearing, submitted in writing that :
48.Reference to notice by cable is to Article 16 which states in part :
49.What was not put before the Judge, at least not directly, was Article 100, Table A which states, in part :
50.Thus it is that the company acted in excess of its obligations in notifying Mr Goldie of the precise details of the meeting. 51.The injunction flowing from the allegation of irregularity should not have been made, and arguably would not have had the Judge been referred specifically to this Article. 52.The meeting timed for 7 January was an EGM, and as the notice reveals, the resolution for removal of a director was required to be, as it was, a special resolution. 53.Mr Goldie deposes that he received the notice; he complains that service of it by email was irregular. This was repeated in a submission by Mr Chan to the Judge :
54.Was there irregularity? 55.First, Article 16 does not apply, for it states it is not applicable where the meeting to be convened is as here a special resolution. The relevant articles are Articles 132 and 135, Table A. 56.These state in part :
57.There being no express reference to service by email, the question to be answered is whether any other form of service is irregular. 58.The matter was considered by MacKinnon LJ in Sharpley v Manby [1942] 1 KB 217 when dealing with the issue of proper notice under section 53 of theAgricultural Holdings Act 1923. He said at p. 221 :
59.An analogy can be drawn with the mode of service of proceedings :
60.In the same case Glidewell LJ said at p. 1585 :
61.Applying these propositions it seems quite apparent that there was no irregularity of service. Mr Goldie received, and received timeously, the notice, which set out precisely the matter to be considered. 62.Mr Chan presumably did not research the law on this crucial feature; certainly he did not take the Judge to these authorities. What he did do was submit :
63.It is hard to understand why Mr Goldie would have been in any better position to do that if he had received the notice by post. 64.Apprised of the law, it seems most unlikely that the Judge would have put paid to the meeting of 7 January. The Inspection Orders 65.In his affidavit, Mr Goldie deposed that the fact that the office of the company was under renovation was not a valid excuse to deny him access to the books and records of the company. 66.In his submission, Mr Chan stated :
67.Quite so. But whilst the correspondence I have referred to on the point was exhibited, in the supporting affidavit, it was not pointed out to the Judge that there were temporary, practical difficulties associated with the company’s management complying with the request. 68.There was no denial or refusal. In the letter from the company to Mr Goldie’s solicitors of 30 December it was written :
69.There is nothing to indicate that the Judge was taken to this letter. Had he done so he may well have heeded that an order would not make the practical difficulty go away. 70.And there was nothing put before the Judge that would allow him to find that the company would renege on its promise to let Mr Goldie have the access he was asking for once order was restored. Determination 71.There was as I find material non-disclosure by Mr Goldie and his representatives at the hearing of 5 January; that is enough to grant the company the discharge it applies for. 72.But further, there was no reason demonstrated why it was, effectively, made ex parte. The one reason put forward was urgency. The need for speed was that the EGM was scheduled for two days after the summons was filed. But it could have been filed back in early December. And there was no explanation given as to why the orders were asked for as, effectively, final orders; hence, an abuse of process. 73.The company’s application is granted; the orders of 5 January 2006 are discharged. 74.The costs order is nisi. This demonstrates, without the benefit of argument, a preliminary view on the manner in which these proceedings were conducted. Costs are to Grandtag, taxed on a common fund basis.
Mr Chan Pat-lun, instructed by Messrs Horvath & Giles, for the Applicant Mr W Wong, instructed by Messrs Poon, Yeung & Li, for the Respondent |
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