Hung Wing San, Tony v. Koo Shing Sun and Another

HCMP 189/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 189 OF 2012

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BETWEEN

AND

HCCW 350/2011

AND

HCA 162/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 162 OF 2012

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Before: Hon Harris J in Chambers

Date of Hearing: 5 September 2012

Date of Decisions: 5 September 2012

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D E C I S I O N S

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1.I have before me 2 applications. The first, an originating summons issued by the Applicant, is for a declaration that a resolution passed at an extraordinary general meeting of the Company on 18 October 2011 appointing his son, Gudy Koo, as a director is valid and effective. In the alternative the Applicant seeks an order under section 114A of the Companies Ordinance for the convening of a meeting of the Company to consider a new resolution for Gudy Koo’s appointment. The second is an application to strike out the High Court Action commenced by the Company against Mr Hung Wing San, Tony, on the grounds that the Company was not properly authorised to commence the proceedings. The result of the second application is dependent on the outcome of the first. If the Applicant is correct in his assertion that his son was properly appointed as a director of the Company in October 2011 the strike out application falls away.

2.The Applicant and Mr Hung are the registered shareholders of 60% and 40% respectively of the Company’s issued capital.  They are both directors of the Company.  On 21 September 2011 the Applicant gave notice to Mr Hung to convene an extraordinary general meeting on 11 October 2011 pursuant to Regulation 51 of Table A of the First Schedule of the Companies Ordinance, which is adopted by Article 1 of the Company’s articles of association.  The Applicant attended the meeting, but Mr Hung did not.  As a result a quorum was not present and pursuant to Article 56 the meeting was adjourned to the same time the following week.  There is no dispute that the meeting was properly convened and properly adjourned to 18 October 2011.  Mr Hung did not attend the meeting.  The Applicant argues that pursuant to Article 56 after 30 minutes the meeting was deemed quorate and he was entitled to, as he in fact did, pass a resolution tabled for consideration by members for the appointment of his Son as an additional director.

3.The Company had adopted the regulations in Table A in the first schedule of the Companies Ordinance.  The relevant regulations are 55 and 56, which provide as follows:

“55. No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business and continues to be present until the conclusion of the meeting; save as herein otherwise provided, 2 members present in person or by proxy shall be a quorum.

56. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members, shall be dissolved; in any other case it shall stand adjourned to the same day in the next week, at the same time and place or to such other day and at such other time and place as the directors may determine, and if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the members present shall be a quorum.”

4.Regulation 55 had been replaced with Article 22, which is in the following terms:

“For all purposes, the quorum for all general meetings shall be two members personally present or by proxy and no business shall be transacted at any general meeting unless the requisite quorum be present at the commencement of business.”

5.Both Regulation 55 and Article 22 provide that a quorum consists of 2 members present personally or in proxy.  Regulation 55 provides that a quorum must be present throughout a meeting.  Articles 22 appears intended to require only that a quorum is present at the commencement of a meeting, but nothing turns on this distinction.  The more controversial Regulation is 56.  It appears to be intended to provide that if a meeting is inquorate it be adjourned for a week and if it is inquorate the following week then after a period of 30 minutes has passed it is deemed quorate.  As Regulation 55 and Article 22 both provide that a quorum is 2 members present personally or by proxy it necessarily seems to follow that Regulation 56 applies to cases in which only 1 member or proxy holder attends a meeting.  Clearly if more than one attends the meeting is quorate and if nobody attends there is no meeting at all.  On the face of the matter it appears that in the present case the meeting on 18 October did become quorate and the resolution appointing Mr Gudy Koo as a director was validly passed.

6.The reason Mr Hung disputes this turns on the language of Regulation 56 which refers to “meeting” and “members”.  In summary Mr Patrick Chong, who appeared for Mr Hung, argued that the authorities show that a meeting generally requires more than 2 people in attendance and the reference to members, plural, is consistent with this and indicates that Regulation 56 does not apply unless at least 2 members are present in person or by proxy.  I asked Mr Chong if he could think of any situation in which on his argument there would be no quorum and Regulation 56 applied.  He could not.  His argument is, therefore, that Regulation 56 is otiose.

7.It is correct that the language of Regulation 56 is not entirely apposite given the fact that the language of Regulation 55 means that Regulation is only engaged at all if less than 2 people turn up a meeting.  It  follows that the Regulation should refer to member singular rather than plural and the Regulation should have been drafted generally in a way which was consistent with business being conducted by only 1 member, or his proxy, of a company.  The reason Regulation 56 is worded as it is, is to be found in the history of the development of Table A.

8.The 1932 Edition of the Companies Ordinance contained the following provisions in Regulations 45 and 46 of Table A:

“45. No business shall be transacted at any general meeting unless a quorum of members is present at the time when the meeting proceeds to business; save as herein otherwise provided, three members personally present shall be a quorum.

46. If within half an hour from the time appointed for the meeting a quorum is not present, the meeting, if convened upon the requisition of members shall be dissolved; in any other case it shall stand adjourned to the same day in the next week, at the same time and place, and, if at the adjourned meeting a quorum is not present within half an hour from the time appointed for the meeting, the members present shall be a quorum.”

9.The Regulation 45 provided that a quorum was three members present personally.  Proxy holders were not taken into account in determining whether or not a meeting was quorate.  Regulation 46 does not expressly state whether the presence of one or two members is sufficient for a quorum in the event that this Regulation is engaged.  Regulation 46 refers to a “meeting”, which unless the context suggests otherwise generally means 2 or more people attending together: see, for example, Sharp v Dawes (1876) 2 QBD 26 at 29; also In re London Flats Ltd [1969] 1 WLR 711 and Prain & Sons 1947 STC 325.  The use of the plural “members” suggests that Regulation 46 requires two members to be present personally in order for Regulation 46 to operate and allow a meeting, which would otherwise be inquorate, to pass a resolution.

10.Some additional support for reading Regulation 46 as requiring at least two members to be present personally in order for business to be transacted is to be found in the decision of the House of Lords in Daimler Company Limited v Continental Tyre and Rubber Company (Great Britain) Limited [1916] 2 AC 307.  In that case the equivalent of Regulation 45 was Article 59. Article 59 provided that a quorum consisted of two members personally.  Article 61 would appear from the judgment to have been in similar, possibly identical terms, to Regulation 46.  Lord Atkinson in his judgment at pages 324 to 325 held that Article 61 meant that a meeting would become quorate if one member and one proxy holder was present.  He rejected the argument that one member alone would be sufficient:

“Article 61, taken in conjunction with article 59, is much relied upon by the respondent company. It provides that in the case of a meeting not convened by requisition, if within half an hour from the time appointed for the meeting a quorum be not present, the meeting is to stand adjourned till that day week, at the same time and place, and if at the adjourned meeting a quorum be not present the members who are present shall be a quorum and may transact the business for which the meeting was called. This, it is insisted, shows that one member may constitute a general meeting, because, although the word ‘members’ is used in the article in the plural, the definition clause (article 1) provides that words importing the singular only include the plural, and vice versa. There are several answers to this contention. The first is that article 1 does not provide absolutely that the singular number is always to include the plural and vice versa, but is only to do so where there is nothing in the subject or context inconsistent therewith; and, second, that the succeeding article prescribing what is to be done at the meeting deals with a member or members who may be present not personally but by proxy, as do also articles 63 and 68. The article, in my opinion, obviously means this, that if there be one member personally present, he and the member or members present by proxy may proceed to transact the business. The subject and the context are inconsistent with any other meaning of the word ‘members’.”

11.All this authority suggests is that Regulation 46 required at least 2 members to be present.  It is of no assistance in the present case because Article 22, like Regulation 55, expressly provides that two members present personally or by proxy constitute a quorum and, therefore, Regulation 55 cannot sensibly be read in the way in which Lord Atkinson read the equivalent Article before him as in the present case the presence of a member and proxy holder would result in the meeting being quorate from the outset.  I do not need to decide how Regulation 46 is to be interpreted, although I incline to the view that it required 2 members to be present personally or by proxy. Regulation 46 unlike Regulation 45 refers to “members present” rather than “members personally present”.  It is also relevant that Regulation 50 provides that proxies may vote and, although I do not have the form of the Articles before Lord Atkinson in the Daimler case, I assume from his judgment that something similar to Regulation 50 was included and this lead him to the conclusion that Article 59 was to be read as allowing the proxies who the Articles allowed to attend and vote to be taken into account in determining whether there was a quorum if a meeting had been adjourned once because insufficient members were personally present.

12.Table A was amended in 1933 and 1974, but the amendments did not concern these Regulations.  By the Companies (Amendment) Ordinance of 1984 the entire Schedule 1, which contained Table A, was repealed and replaced with new Regulations, which contain Regulations 55 and 56.  The material changes were that the requirement that 3 members be personally present for a quorum was replaced with a requirement that 2 members present in person or by proxy would be a quorum.  Regulation 56 was not changed at all.  The question, therefore, becomes whether Regulation 56 is otiose or should be read as providing that as long as one member in person or by proxy attends at the adjourned meeting, after 30 minutes from its commencement, there is quorum?  In my view the answer is in the affirmative.  Mr Chong has not been able to suggest any other purpose behind Regulation 56’s inclusion and it does not seem to me that so reading it imposes an excessively strained interpretation on the language used.  As I have already noted the term “meeting” whilst normally indicating that more than one person must be present may be read otherwise if the context so requires: see Sharp v Dawes ibid and by way of example section 114AA of the Companies Ordinance.  So far as the use of “members” is concerned this provides no impediment as section 7 of the Interpretation and General Clauses Ordinance, Cap 1, provides that “Words and expressions in the singular include the plural and words and expressions in the plural include the singular.”  In any event even if section 7 did not allow “members” to be read in the singular I would read it as simply infelicitous drafting rather than as rendering the Regulation meaningless and thus otiose.

13.In my view the resolution passed on 18 October 2011 was validly passed and accordingly I make the declaration sought by the Applicant in the Miscellaneous Proceeding and dismiss Mr Hung’s strike out application in the High Court Action.  In respect of both I order that Mr Hung is to pay the costs forthwith, such costs to be taxed if not agreed.

Mr Patrick Chong, instructed by Eversheds, for the 1^st respondent (in HCMP 189/2012), the petitioner (in HCCW 350/2011) and the 1^st defendant (in HCA 162/2012)

Mr Jenkin Suen & Ms Ebony Ling, instructed by Marie Tsang, Dustin Chan & Co, for the applicant (in HCMP 189/2012), the 1^st respondent (in HCCW 350/2011) and the plaintiff (in HCA 162/2012)

Please refer to CACV241/2012 & CACV41/2013 for the relevant appeal(s) to the Court of Appeal.