Yung Siu Ying v. Hong Kong Sailing Federation
Read the full judgment text of HCMP 2395/2008 on BabelCite. This High Court CFI judgment was delivered on 29 January 2010.
1. This is the hearing of an originating summons issued by Madam Yung Siu Ying on 28 November 2008. The plaintiff is a member of the Hong Kong Sailing Federation, the defendant herein. She seeks a determination of the court on the following questions:
Cited by 14 cases · Cites 2 cases
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HCMP 2395/2008 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 2395 OF 2008 ----------------------
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--------------------- Before: Hon Kwan JA (sitting as an additional Judge of the Court of First Instance) in Chambers Date of Hearing: 22 January 2010 Date of Handing Down of Decision: 29 January 2010 ---------------------- DECISION ---------------------- The application 1.This is the hearing of an originating summons issued by Madam Yung Siu Ying on 28 November 2008. The plaintiff is a member of the Hong Kong Sailing Federation, the defendant herein. She seeks a determination of the court on the following questions:
2.The plaintiff also claims such declaratory relief and directions as may be appropriate in consequence of the answers to the above questions as given by this court. The background 3.I will first set out the relevant background matters leading to the EGM. 4.The defendant is a company incorporated by guarantee with a licence granted pursuant to section 21 of the Companies Ordinance, Cap. 32. It is the national authority for the sport of sailing in Hong Kong and is recognized as the authorized body for the promotion locally of the sport of sailing and for despatching athletes to represent Hong Kong in international sailing competitions. Among other things, the defendant is responsible for the accreditation of sports facility as approved centre for sailing and the accreditation of sailing teachers. 5.The business of the defendant is managed by its Council. Council members work on a pro bono basis. The defendant has a small paid secretariat, consisting of the Secretary General and one staff. It depends for finance on subscriptions, government subvention, donations and sponsorship and other legitimate means to generate income. 6.As mentioned earlier, the plaintiff is a member of the defendant. She is also a council member of the Hong Kong Sailing Coach Union; the latter is not a member of the defendant. 7.In 2007, the defendant introduced new policies on the revalidation of instructor certificates and courses for assessment and revalidation of dinghy instructors. As stated in a subsequent letter of the plaintiff’s solicitors to the defendant’s solicitors dated 6 May 2009, these policies were perceived by the plaintiff and a group of members who are also members of the Hong Kong Dinghy Instructors Association (“the HKDIA”) as not giving “any chance or respectable career opportunity to those who have already obtained accreditation and registration as ‘Qualified Sailing Teachers’ by [the defendant].” The HKDIA is not a member of the defendant. 8.The plaintiff and the HKDIA raised complaints and queries regarding the expense and effectiveness of the new policies and the hiring of overseas coaches to train instructors. Some of their exchanges with the defendant by letter and email in 2006, 2007 and 2008 and various responses made by the Secretary General were exhibited in evidence. 9.The plaintiff and the HKDIA made public their grievances. They held a press conference, organised a march in Chater Garden, lobbied a legislator, and approached the Leisure and Cultural Services Department(“the LCSD”) of the government seeking the latter’s intervention. I have been provided with a clipping of the press reports in English and in Chinese in 2007, containing the criticisms made by the HKDIA against the defendant and why they were against the new policies. In December 2007, the LCSD wrote to the Hong Kong Sailing Coach Union indicating support for the defendant’s new qualification revalidation scheme for dinghy instructors and declining the suggestion to recognise another authority to take over the training courses and the issuance of instructors’ certificates. The defendant published a statement on its website in December 2007 refuting a number of allegations made by the HKDIA. 10.On 17 March 2008, the defendant received a statement signed by the plaintiff and 18 others denoting an agreement to convene an extraordinary general meeting to vote on the defendant re-establishing a “Dinghy Development Committee” with the structure proposed, comprising representatives from the government, the defendant, the Hong Kong Sailing Coach Union and other bodies, “to re-design the direction of the development and training of dinghy sailing and to handle all matters in relation to dinghy sailing”. Some of the bodies proposed to be represented on this committee are not members of the defendant. The defendant responded by a circular to all its members on 3 April 2008 pointing out the apparent deficiencies of the statement as a requisition for an extraordinary general meeting and making other observations on the practicalities of the proposals in the statement. The defendant instructed the Secretary General to seek clarification from each of the signatories. In the end, the signatories to the statement did not proceed with the purported requisition. 11.After the failed attempt of the plaintiff and some members to requisition an extraordinary general meeting, the defendant sent a letter to all “HKSF Instructors” dated 15 May 2008, informing them of its decision to hold a question and answer session with dinghy instructors to address any queries they might have on the new syllabus and logbook for the HKSF Dinghy Instructors Scheme. This question and answer session took place in June 2008, and was attended by 26 instructors. According to the president’s report for 2008 tabled at the defendant’s annual general meeting in December 2008, there was a “frank and open dialogue” on the instructors’ areas of concern and some of the instructors provided the defendant with constructive ideas on how to improve the revalidation courses and to enhance the level of standards of dinghy instructors. 12.For the purpose of the present application, it is not necessary for the court to express any views on the merits or otherwise of the respective positions taken by the plaintiff and the defendant on the defendant’s policies regarding the revalidation of certificates for dinghy instructors. I make no comment on the merits of the position of any party on this. What is important to note is that the matter had been debated extensively by some members of the defendant who also belonged to the Hong Kong Sailing Coach Union or the HKDIA for well over a year before the present requisitions were raised, and that the positions advocated by these members were sufficiently, not to mention publicly, known. The Requisitions and the EGM 13.On 18 July 2008, 26 members of the defendant, including the plaintiff, lodged another set of requisitions for an extraordinary general meeting (“the Requisitions”), to vote on three issues set out therein, namely, to “re-establish” the Dinghy Development Committee by the defendant, to amend the Articles of Association to prescribe the Dinghy Development Committee as a standing committee, and to “reinstate” the policy of localization to appoint local coaches to train instructors. The Requisitions then set out the arguments and objectives of the requisitionists. The Requisitions bore the names of the requisitionists and the signatures of each. 14.On 6 August 2008, the Secretary General wrote to the requisitionists stating that notwithstanding the absence of properly worded resolutions sought to be moved in the Requisitions, the Council had resolved to convene the EGM on 5 September 2008 6 p.m. and asking them to provide properly worded resolutions as soon as possible with a reply signed by each of them to the three questions set out in the letter, being (1) the type of resolution they intended to propose; (2) whether consent had been sought from the organisations which they proposed to form the Dinghy Development Committee; and (3) whether clearance had been sought from the CompaniesRegistry on the proposed amendment to the Memorandum and Articles of Association. The letter concluded by stating that: “Please note that [the defendant] is obliged to provide its members with copy of your requisition.” 15.On 8 August 2008, notice of the EGM was given by the Secretary General. 16.A reply to the letter of 6 August was given in a letter in Chinese dated 15 August 2008 signed by 11 of the 26 requisitionists (“the Reply”). A certified translation of the Reply has been obtained. In response to question (1), it was stated that the issues are “amended as below to be voted by members at the EGM of members” and these issues read as follows:
17.The Annex set out the proposed structure of the Dinghy Development Committee. This was the same as the structure proposed by the statement signed by the plaintiff and others in March 2008.
18.The 11 requisitionists confirmed in the Reply they had not obtained consent from the organisations which they proposed to form the Dinghy Development Committee, nor had they sought clearance from the Companies Registry on the proposed amendment to the Memorandum and Articles of Association. 19.Notwithstanding that the Reply was given by only 11 of the requisitionists, the Council decided not to raise any point on this and to proceed with the EGM requisitioned. 20.On 27 August 2008, the defendant issued a circular to all members (“the Circular”), enclosing the letter of the defendant to the requisitionists dated 6 August and the Reply. The defendant set out in the Circular the Council’s views on each of the resolutions moved by the requisitionists with a recommendation to members to vote against them. It is not necessary for this court to express any opinion on the criticisms of the resolutions made by the Council in the Circular, as I am not concerned with the merits or otherwise of the respective positions taken by the two sides. The Circular ended with the statement that “the past events on the same subject matters raised by the same group of individuals have drained both the monetary and human resources of [the defendant]” and that “in the interest of [the defendant] and the Members, Council is committed to put the same subject matter which is repeated again and again by the same group of individuals to a complete stop”. The Council proposed to move the defendant to pass the following resolution by poll as an ordinary resolution at the EGM:
21.Also enclosed to the Circular were a supplementary notice of the EGM and a poll paper for the EGM. The supplementary notice set out the three resolutions in Chinese moved by 11 of the requisitionists as stated in the Reply and the suggested summary translation of each resolution in English by the defendant, as well as the counter-resolution put forward by the Council. The poll paper set out the four resolutions for members to vote on and it was stated that to be valid, the form must be properly completed and must reach the defendant’s secretariat by 6 p.m on 4 September 2008, the day before the EGM. 22.Mr Albert Yau, counsel for the plaintiff, submitted the defendant did not send to its members a copy of the Requisitions, so the members were not informed of the arguments and objectives of the requisitionists set out therein. The plaintiff did not assert in any of her affirmations that the defendant did not provide a copy of the Requisitions to its members. Counsel’s contention was premised on the fact that the Circular merely enclosed the defendant’s letter of 6 Augustand the Reply. 23.Having read the evidence again, I do not accept this contention. I find that a copy of the Requisitions was sent to all members along with the notice of the EGM dated 8 August 2008, notwithstanding it does not appear on the face of that notice that was done. My finding is based on these reasons. 24.Firstly, it is apparent from the last sentence in the letter of 6 August that the defendant had intended a copy of the Requisitions would be sent to its members. Secondly, the 11 requisitionists who signed the Reply of 15 August complained in that letter the defendant had disclosed their signatures to other members or organisations unnecessarily in the defendant’s notice convening the EGM. This is clear indication that a copy of the Requisitions, bearing the signatures of the requisitionists, was provided to the defendant’s members with the notice for the EGM dated 8 August. Thirdly, the Secretary General in her affirmation deposed that “all along the defendant has duly and promptly circulated all the written representations made by the Requisitionists to its members, which included the purported requisitions and replies to Council’s requests for clarifications.” This was not contradicted by the plaintiff in her affirmation in reply. I see no reason to doubt the evidence of the Secretary General on this. 25.The plaintiff did not attend the EGM held on 5 September 2008, nor was there any record or evidence in writing of any member attending as her proxy or representative, although she asserted in her affirmation she had appointed a member of the defendant, Madam Chan Oi Ling Alexandra, as her proxy. A poll paper with the name and signature of the plaintiff not bearing the poll number designated for her but bearing the poll number designated for another member, Fung Chi Chung, was returned to the secretariat before the deadline. The chairman announced the result of the poll on each resolution by giving the number of votes for and against and then the result. 26.Members were informed of the results of the poll by the defendant’s circular dated 17 September 2008. The three requisitions put forward by 11 of the requisitionists were defeated by an overwhelming majority, namely, 36 to 235, 35 to 235 and 36 to 193 respectively, whereas the counter-resolution was carried by an overwhelming majority being 231 to 38. The voting pattern was consistent; there was no ambiguity of the views expressed by the votes cast by those members who had voted by the poll papers. If there were procedural irregularities 27.The plaintiff complained of a number of procedural irregularities in support of her contention they vitiated the results of the voting on the resolutions at the EGM, in the affirmations she filed and in the submissions of her counsel. 28.Chief among the irregularities complained of is the method of voting by calling a poll prior to the EGM and requiring members to lodge the poll papers a day before the EGM. It was submitted on the plaintiff’s behalf this method of voting is not provided for in the Articles of Association and is not in compliance with the methods of voting provided for in the Articles. 29.Mr Wallace Cheung, who appeared for the defendant, accepted in the course of the argument that the above method of voting by calling a poll in advance of the general meeting is not a method provided for in the Articles. 30.I have considered the relevant provisions in the Articles and I am inclined to think this would appear to be a procedural irregularity. 31.Article 26 provides as follows:
32.Under this provision, a poll may be demanded before or upon the declaration of the result of the show of hands. There is no provision in the Articles that a poll may be demanded before a resolution is put to the vote of the general meeting or before the holding of the general meeting. 33.Article 27 provides that if a poll be demanded in the manner provided in article 26, it shall be taken at such time and place and in such manner as the chairman may direct and the result of the poll shall be deemed to be the resolution of the meeting at which the poll was demanded. I do not think this would assist the defendant’s case. 34.In the affirmation made by the Secretary General, she had pointed to provisions in the Articles of Association which provide for or contemplate the use of voting or ballot paper – articles 21, 31 and 46. I agree it is envisaged in articles 21 and 31 that voting papers may be sent prior to a general meeting and that voting papers may be used at a general meeting. These articles do not give support to the contention that a poll may be called in advance of a general meeting or that members must lodge the completed poll paper before the meeting. As for the ballot procedure in article 46, this is concerned with the situation where a ballot is required on the election of members of the Council, and has no bearing on the voting method of other resolutions in general. 35.The Secretary General had also relied on the general power of the Council to manage the business of the defendant in article 47 and to make rules and regulations for the administration of the defendant in article 66. I do not think these provisions would empower the Council to adopt a method of voting not provided for in the Articles. 36.The plaintiff also complained of other irregularities, none of which I find to be of substance. I do not propose to deal with each and every one of these complaints. 37.The plaintiff complained that by adopting the method of voting in advance, there was no discussion of the resolutions at the EGM so the requisitionists were denied of the opportunity of discussing the matters to be resolved. Mr Yau relied on the dicta of Lindley MR and Chitty LJ in Wall v. London and Northern Assets Corporation [1898] 2 Ch 469 at 480 to 481 and 483 to 484. I do not think this complaint is made out on the facts of the present case. It is clear from the dicta in the case cited that the chairman of a meeting could come to the conclusion that the meeting had heard enough and could declare the discussion closed, and that is not a matter calling for the intervention of the court, otherwise the court would allow a minority to “tyrannise over the majority”. Given that the views of the requisitionists attacking the defendant’s policies were well ventilated privately and publicly for well over a year, and that copies of the Requisitions (which Mr Yau submitted had set out sufficiently the arguments and objectives of the requisitionists) and the Reply were provided by the defendant to all its members in advance, I find nothing “arbitrary or vexatious” on the part of the Council in taking the position that members had heard enough debate on the issues proposed to be put to a vote, that members were in a position to make an informed decision on the issues and there should be no further discussion at the EGM to be held. 38.Mr Yau did not go so far as to contend that a member would have an unqualified right to present his arguments for or against a resolution at a general meeting. There is no authority in support of any such right. I hold the requisitionists were not deprived of a reasonable opportunity to present their arguments to the members of the defendant. 39.The plaintiff complained the Circular was one-sided in that it only set out the arguments of the Council and lobbied members to vote against the resolutions moved by the requisitionists. I cannot see how that could be regarded as an irregularity. As I have found, the defendant had supplied to its members copies of the Requisitions and the Reply, which contained the requisitionists’ arguments and positions. The Council was entitled to put across to members its views. 40.The contention in the plaintiff’s affirmation that the counter-resolution passed at the EGM “has the effect of subverting or amending the Articles enabling the Members to raise requisition” and that the counter-resolution should require a special resolution is misconceived. Mr Yau’s submission that the counter-resolution has the effect of curtailing the power of the defendant to set up a Dinghy Development Sub-Committee in future and would require a special resolution is likewise without merit. The wording of the counter-resolution was carefully chosen. It does not have the effect contended for by the plaintiff in her affirmation or by her counsel in his submission and does not require a special resolution. The irregularity principle and members’ rights to enforce the constitution 41.Mr Cheung submitted for the defendant that notwithstanding there may be a procedural irregularity, the court should not grant the declarations sought in the originating summons, invoking the irregularity principle. As Le Pichon J (as she then was) had put it concisely in YipPeter v. Asian Electronics Ltd. [1998] 2 HKC 96 at 102I to 103B:
42.Another recent instance in which the principle was applied by a Hong Kong court was Re Green Valley Investment Ltd. [2003] 2 HKLRD 915 at 924J to 925J, paras. 49 to 54. Yuen J (as she then was) cited dicta from the well known cases of MacDougall v. Gardiner [1875] 1 Ch D 13 at 23, per James LJ and Browne v. La Trinidad, supra. at 17, per Lindley LJ. At para. 52, Yuen J referred to the rule in Foss v. Harbottle (1843) 2 Hare 461 and re-affirmed the principle that “irregularities in matters affecting internal management can be regularized by the majority shareholders in a properly convened meeting, so long as it would not constitute fraud on the minority”. The originating summons seeking a declaration that an extraordinary general meeting was invalid due to lack of notice was dismissed, as it was clear the resolutions passed at the meeting under attack could always be confirmed by a majority vote of the defendants at a meeting properly called with notice given to the plaintiffs. 43.MacDougall v. Gardiner was referred to by Lord Davey in Burland v. Earle [1901] AC 83 at 93 to 94 as an illustration of the proposition that “no mere informality or irregularity which can be remedied by the majority will entitle the minority to sue, if the act when done regularly would be within the powers of the company and the intention of the majority of the shareholders is clear.” 44.However, there exists another line of cases which showed that in certain circumstances, in connection with matters which could be regarded as procedural, an individual shareholder is allowed to bring an action against the company to protect his rights under the constitution, without having to subordinate his rights to the wishes of the majority. Examples of this line of cases to enforce personal rights of shareholders are Pender v. Lushington (1877) 6 Ch D 70 (the right to have the votes on the shares counted and recorded at a general meeting despite the distribution of the shares among some nominee shareholders); Wood v. Odessa Waterworks (1889) 42 Ch D 636 (the right to have a dividend paid in the manner specified by the articles of association); Kaye v. Croydon Tramways [1898] 1 Ch 358 and Baillie v. Oriental Telephone & Electric Co. Ltd. [1915] 1 Ch 503 (the right to proper notice of meetings to consider a special resolution); Edwards v. Halliwell [1950] 2 All ER 1064 (the right to have a decision taken in the way prescribed by the articles, which required a two-thirds majority on a ballot vote). 45.Section 23 of Cap. 32 was amended by the Companies (Amendment) Ordinance 2003 to expressly provide for a statutory exception to the rule in Foss v. Harbottle that only the company is the proper person to bring legal proceedings to enforce its rights. Before the amendment, the courts already recognised the possibility of members enforcing the constitution as a statutory contract as against the company and other members in the other line of cases referred to above. Section 23(1A) provides that the memorandum and articles shall, when registered, be enforceable by the company against each member and by a member against the company and against each other member. This statutory exception is based on the fact that section 23 gives a shareholder a personal right to enforce the provisions of the memorandum and articles. Learned authors have opined that enforcement of the articles by a personal action at common law is “fraught with difficulty” (Hong Kong Company Law Handbook by Tomasic and Tyler, 11th ed., para. [168A.13] at page 793) and “it would seem clear that a member does not have a right to have all the articles observed” (Farrar’s Company Law, 4th ed., page 435). 46.Mr Yau relied on several Australian decisions in which the courts drew a distinction between personal and individual rights given to a shareholder by the articles and corporate membership rights and held that rights of the former kind cannot be affected or denied by the will of the majority (Ryan v. South Sydney Junior Rugby League Club Ltd. (1974) 3 ACLR 486 at 492 to 493; Papaioannoy & Ors. v. The Greek Orthodox Community of Melbourne & Ors. (1978) 3 ACLR 801 at 805 to 806; Link Agricultural Pty. Ltd. v. Shanahan & Ors. (1998) 28 ACSR 498 at 504 to 505). However, the distinction between what constitutes a personal right and a corporate right is not always clear (Corporations Law in Australia by Tomasic, Bottomley and McQueen, 2nd ed., para. 15.4.2; Company Law in Hong Kong, Practice and Procedure, 2007 ed., para. 8.065). Mr Yau urged the court to take a broader view of the scope of personal rights of members. 47.I have also been referred by both sides to a number of other academic works in England, Australia, and Hong Kong, which I will not enumerate. 48.The work I find to be of the most assistance is the article of R.R. Drury entitled “The Relative Nature of a Shareholder’s Right to Enforce the Company Contract” [1986] CLJ 219, in which the learned author discussed the differentiation between the line of cases which disallowed an individual shareholder to sue in respect of ratifiable internal procedural irregularities applying the rule in Foss v. Harbottle, and cases which allowed an individual shareholder to sue to enforce personal rights, usually of a proprietary nature. Merely categorising a right as personal right does not provide a wholly satisfactory solution. The author suggested a possible explanation to chart this borderline between cases where the rule in Foss v. Harbottle applies and cases where the rule does not prevent an individual shareholder from suing. The pertinent question he posed is “whether a particular dispute is appropriate for determination by an ordinary majority” (at 240). The exposition at 240 to 241 read as follows:
49.The analysis in the above article provides a rational basis in differentiating a case for judicial action from a case where it is inappropriate for judicial intervention and seeks to define the scope of applying the rule in Foss v. Harbottle in a flexible way which would allow the court to do justice in a given situation. Analysed in this way, it could be seen that many of the cases in which an individual shareholder was allowed to sue had in common the fact that various circumstances existed in them which rendered it inappropriate or irrelevant to refer that individual’s claim to a decision of the majority in general meeting, such as acts which were beyond the power of an ordinary majority, or where it was impossible or impracticable for members to sort things out for themselves. I would respectfully agree with the approach of the learned author, and the conclusion he reached at 245:
50.Section 23(1A) does not confer an absolute right on a shareholder to enforce the company contract. Even though a member has standing to bring an action to enforce any provision of the constitution, the court may still decline to grant remedy where the irregularity principle applies (Palmer’s Company Law, vol. 1, 25th ed., para. 7.911; Company Law in Hong Kong, Practice and Procedure, op.cit., paras. 8.065 and 8.066). In the present case, as I have found, the requisitionists had been given a reasonable opportunity to present their arguments and objectives in moving the resolutions. There was no infringement of any personal right in that regard. The wishes of the majority, as reflected in the votes cast by poll paper, were very clear. Notwithstanding any irregularity in the use of the poll paper, the majority could ratify the irregularity by an ordinary resolution. In this situation, the irregularity principle should be applied. There would be little point in declaring the resolutions invalid where “the ultimate end … is only that a meeting has to be called, and then ultimately the majority gets its wishes” (MacDougall v. Gardiner, supra. at 25, per Mellish LJ). 51.For the above reasons, I decline to make any declaration sought in the originating summons. The application is dismissed. I make an order nisi the plaintiff is to pay the defendant's costs of this application.
Mr. Albert Yau Kai Cheong, instructed by Messrs Lau, Chan & Ko, for the Plaintiff Mr. Wallace Cheung, instructed by Messrs Winnie P.H. Lun & Associates, for the Defendant |
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