Wong Pak Sum v. Hong Kong Furniture & Decoration Trade Association Ltd
Read the full judgment text of HCMP 2946/2013 on BabelCite. This High Court CFI judgment was delivered on 9 October 2014.
1. The defendant is a Hong Kong company limited by guarantee without a share capital. The plaintiff, who is unrepresented in these proceedings, is a member of the defendant association.
Cited by 1 case · Cites 5 cases
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HCMP 2946/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 2946 OF 2013
BETWEEN
Before: Deputy High Court Judge Marlene Ng in Chambers Dates of Hearing: 9 and 13 October 2014 Date of Decision: 9 October 2014 Date of Handing Down Reasons for Decision and Judgment: 17 October 2014 ________________________________________ REASONS FOR DECISION AND JUDGMENT ________________________________________ I. INTRODUCTION 1.The defendant is a Hong Kong company limited by guarantee without a share capital. The plaintiff, who is unrepresented in these proceedings, is a member of the defendant association. 2.By the originating summons in these proceedings issued on 31 October 2013, the plaintiff sought the court’s declaration that two resolutions proposed at the extraordinary general meeting of the defendant association held on 28 October 2013 (“EGM”) were special business and as such could only be passed by special resolution, ie with three quarters majority. 3.In fact, one of the impugned resolutions was proposed and passed as a special resolution as follows (“Special Resolution”):
4.The other relevant provisions of the defendant’s articles of association (“Articles”) are as follows:
5.According to the latest annual return of the defendant made up to 28 October 2013 and dated 28 November 2013 (“Latest AR”), the defendant’s 12 directors were:
6.On 14 November 2013, the defendant’s solicitors wrote to the defendant, setting out the proposed terms of their retainer in respect of the present proceedings (“Retainer Letter”). 7.According to the minutes of the 15th meeting (“Board Minutes”) of the defendant’s Board of Directors (“Board”) for the year 2013 held on 18 November 2013 (“Board Meeting”), Yim Chi Ming Eric (嚴志明) was elected as chairman of the Board Meeting. The recitals of the Board Minutes referred to inter alia the Special Resolution passed at the EGM, the present proceedings commenced by the plaintiff, the Retainer Letter and drafts of the acknowledgment of service and other documents to be filed for and on behalf of the defendant in the present proceedings for the then upcoming hearing of the originating summons before G Lam J on 21 November 2013. 8.According to the Board Minutes,
9.On 15 and 16 November 2013, the Other Directors signed their respective appointment letters (“Appointment Letters”) for appointing the Alternate Directors to act on their behalf for the purpose of the Board Meeting pursuant to clauses 44A, 44B and 44C of the Articles. 10.According to the Board Minutes, resolutions were passed by majority to confirm, agree, approve and/or ratify the retainer for the defendant’s solicitors to act for the defendant in the present proceedings (and any related legal procedure) on terms as set out in the Retainer Letter, and to authorise Yim Chi Ming Eric (嚴志明) to handle all/any matters in respect of the present proceedings and to instruct counsel and the defendant’s solicitors to deal with all legal procedure. 11.Thereafter, Yim Chi Ming Eric (嚴志明) signed the Retainer Letter for and on behalf of the defendant. 12.After the hearing on 21 November 2013, G Lam J by his judgment dated 3 December 2013 (“Judgment”) explained that the Special Resolution being one of the impugned resolutions was in fact proposed and passed as a special resolution, and he further held that the other impugned resolution, albeit an item of special business, did not require to be transacted by special resolution. The learned judge dismissed the originating summons and granted a costs order nisi that the plaintiff pay the defendant’s costs to be taxed if not agreed. Such costs order nisi has since become absolute. For convenience, I shall refer to the aforesaid costs order nisi which has become absolute as the “Costs Order”. 13.On 12 February 2014, the defendant’s solicitors wrote to the plaintiff to demand payment of costs under the Costs Order which they have summarily assessed to be $143,037, failing which the defendant would proceed to tax their costs. On 20 February 2014, the plaintiff replied to say “不同意[the defendant]向[the plaintiff]追討上述案件訟費”. On 24 February 2014, the defendant’s solicitors wrote to the plaintiff to demand payment of costs under the Costs Order in the revised sum of $146,837 pursuant to their draft taxation bill of costs, failing which the defendant would proceed to tax their costs. On 28 February 2014, the plaintiff replied to reiterate “不同意[the defendant]向[the plaintiff]追討上述案件訟費”. 14.The Form D2A Notification of Change of Secretary and Director (Appointment/Cessation) (“Form D2A”) dated 27 February 2014 signed by Yim Chi Ming Eric (嚴志明) and received by Companies Registry on 3 March 2014 recorded that the following directors had appointed the following alternate directors on 13 January 2014:
15.On 5 March 2014, the defendant commenced taxation proceedings by filing a Notice of Commencement of Taxation returnable before Master K Lo on 29 April 2014. The defendant also filed their itemised taxation Bill of Costs dated 4 March 2014 under the Costs Order for the total sum of $146,837 and for the costs of the taxation proceedings to be assessed (“Bill of Costs”). 16.On 31 March 2014, the plaintiff filed his itemised List of Objections to the Bill of Costs, and by reason of his objections he claimed that the quantum of the Bill of Costs should be reduced by $146,576. 17.On 8 April 2014, the defendant filed the Application to Set Down a Bill for Taxation. 18.On 22 April 2014, the plaintiff filed a summons to dismiss the Application to Set Down a Bill for Taxation and/or the taxation proceedings (删除被告人的訟費評定申請) (“1st Summons”). Although not expressly spelled out in the 1st Summons, it became apparent from the plaintiff’s supporting affidavit and written submissions (as described in the paragraph below) that the plaintiff contended that the commencement of the taxation proceedings were not properly authorised by the defendant, his essential complaint being whether the Board Meeting that resolved to engage the defendant’s solicitors to act for the defendant in the present proceedings and for all other related matters was valid and quorate. 19.On 22 and 28 April 2014 respectively, the plaintiff filed his affidavit in support of the 1st Summons (“Plf 1st Aff”). On 28 April 2014, he lodged his written submissions. The plaintiff claimed the taxation proceedings issued by the defendant against him were not properly authorised:
20.By a Form D2A dated 28 April 2014 signed by Yim Chi Ming Eric (嚴志明) and received by the Companies Registry on 29 April 2014, Leung Lai May (梁勵) was appointed as alternate director to Leung Chup Charlie (梁輯) on 31 March 2014. 21.On 26 April 2014, the defendant filed the 2nd affirmation of Yim Chi Ming Eric (嚴志明) in opposition (“Yim 2nd Aff”). Yim referred to the resolutions passed at the Board Meeting. He claimed 11 directors attended the Board Meeting with four Relevant Directors attending such meeting in person in their own personal capacities as directors and, as the case may be, in their respective capacities as Alternate Directors of the Other Directors pursuant to articles 44A, 44B and 44C of the Articles. 22.At the taxation call-over hearing on 29 April 2014, Master K Lo dismissed the 1st Summons, and ordered the plaintiff to pay to the defendant costs of the 1st Summons summarily assessed at $5,475 (“Assessed Costs”) (“Master Lo Order”). Pursuant to the Master Lo Order, the substantive hearing of the taxation of the Bill of Costs was scheduled to be heard on 7 August 2014. No appeal was brought against the Master Lo Order, but the Assessed Costs had not been paid. 23.The Form D2A dated 9 May 2014, signed by Yim Chi Ming Eric (嚴志明) and received by the Companies Registry on 12 May 2014 reported that the following persons had been appointed as directors as from 11 August 2012:
24.On 3 June 2014, the defendant’s solicitors wrote to the plaintiff to demand for payment of the Assessed Costs. 25.On 28 July 2014, the plaintiff filed a summons to dismiss the Application to Set Down a Bill for Taxation and/or the taxation proceedings “in the sum of $146,837 and costs in the sum of $5,475” (“剔除被告人的訟費評定申請，金額146,837-及訟費5475-”) (“2nd Summons”). The sum of $146,837 refers to the amount of costs claimed by the defendant in the Bill of Costs filed pursuant to the Costs Order, and the sum of $5,475 refers to the Assessed Costs under the Master Lo Order. 26.On 28 July and 7 August 2014, the plaintiff filed his two affidavits (“Plf 2nd Aff” and “Plf 3rd Aff”) and his written submissions in support of the 2nd Summons. The Plf 2nd Aff claimed that only the four Relevant Directors personally attended the Board Meeting, and such meeting and the resolutions passed during such meeting were void and of no effect due to insufficient quorum (ie less than 11 directors). The same exhibits were disclosed in the Plf 2nd and 3rd Affs. 27.The plaintiff alleged the Board Meeting was not properly held on the ground that it was not quorate pursuant to article 51 of the Articles that required a quorum of 11 directors for meetings of the Board, but only four directors were physically present at the Board Meeting. 28.On 2 August 2014, the defendant filed the 3rd affirmation of Yim Chi Ming Eric (嚴志明) in opposition (“Yim 3rd Aff”). The Yim 3rd Aff claimed the Board Meeting was quorate with the attendance of 11 directors, four of which attended in person in their own capacities as directors, and as the case may be, acting in their respective capacities as the Alternate Director(s) of the seven Other Director(s) pursuant to the Appointment Letters and articles 44A, 44B ad 44C of the Articles. 29.The Yim 3rd Aff further noted that the plaintiff by the 1st Summons (and the Plf 1st Aff) which sought to dismiss the defendant’s Application to Set Down a Bill for Taxation filed on 9 April 2014 pursuant to the Costs Order, and by the plaintiff’s written submissions for the hearing of the 1st Summons, had already alleged and put in issue the matters of article 51 of the Articles and whether the Board Meeting was quorate and properly held with the businesses thereat properly transacted. Master K Lo dismissed the 1st Summons with costs after considering the Plf 1st Aff and Yim 2nd Aff, and the written and oral submissions of the plaintiff and the defendant’s solicitor. 30.The Yim 3rd Aff claimed the plaintiff’s application by the 2nd Summons for an order to again dismiss the defendant’s taxation proceedings (and also the Assessed Costs) after dismissal of the 1st Summons by Master K Lo was a delaying tactic amounting to abuse of the court’s process. It was said that in view of (a) the underlying objectives in Order 1A of the Rules of the High Court (“RHC”), (b) the court’s case management powers in Order 1B of the RHC, and (c) the common law principle of issue estoppel, the plaintiff should be precluded from renewing such application which had already been put in issue and determined against him so as to (i) avoid incurring further/unnecessary legal costs and expenses and (ii) ensure taxation of the Bill of Costs would be dealt with expeditiously. 31.At the hearing of the 2nd Summons on 7 August 2014, Master C Chow dismissed the 2nd Summons and ordered the plaintiff to pay the defendant costs of the 2nd Summons on indemnity basis summarily assessed as $5,000 (“Master Chow Order”). Upon dismissal of the 2nd Summons, Master C Chow proceeded to tax the Bill of Costs. The taxation was not completed on that day, and was adjourned part‑heard to a date to be fixed. The part-heard taxation would resume to be heard on 24 September 2014. 32.On 12 September 2014, the plaintiff filed a Notice of Appeal to set aside the Master Chow Order (“Notice of Appeal”). The appeal under the Notice of Appeal (“Appeal”) was scheduled to be heard on 13 October 2014 before me (“2nd Hearing”). 33.On the same day, the plaintiff filed his affidavit in support of the Notice of Appeal (“Plf 4th Aff”) stating that “原告人提出上訴理由:1)被告人並無抗辯的理據2)聆案官以一案不能兩審撤銷原告人的傳票申請”. 34.On 19 and 23 September 2014, the plaintiff sent two emails to the defendant’s solicitors to request for copies of the Documents referred to in the paragraph below for the purpose of the hearing of the Appeal at the 2nd Hearing. The defendant did not accede to such request. 35.On 24 September 2014, the plaintiff filed a summons for production by the defendant of the following documents (“3rd Summons”):
36.On the same day, the plaintiff filed his affidavit in support of the 3rd Summons (“Plf 5th Aff”) stating that “原告人分別去函兩次要求被告人提供文件，惟被告人並無回覆，現要求法庭作出裁決。” 37.On 6 October 2014, the defendant filed Yim’s 4th affirmation in opposition (“Yim 4th Aff”):
II. 3rd SUMMONS 38.The hearing of the 3rd Summons came before me on 9 October 2014 (“1st Hearing”). After hearing submissions by the plaintiff and Mr Lung, counsel for the defendant, I dismissed the 3rd Summons and reserved the issue of costs. I also reserved my reasons for dismissal of the 3rd Summons which I now give. 39.The starting point is the plaintiff’s reason or basis for seeking copies of the Documents. The plaintiff claimed he required copies of the Documents for the purpose of the Appeal and (as a corollary thereto) for preparation of the hearing bundle for the Appeal because (a) the defendant “omitted” (欠缺遺漏) to disclose the Documents amongst the other documents they adduced in the present proceedings, and (b) it would be necessary and helpful to the court in its adjudication of the Appeal for a full set of documents in relation to the Board Meeting (including the Documents) to be adduced and placed before the court. 40.At the 1st Hearing, Mr Lung conceded that the Appeal was made within time, and he withdrew his submissions in paragraph 37(a) above. (a) Member’s right of inspection 41.The plaintiff conceded that presently he is a member and not a director of the defendant. There is no general common law right for members of a company to inspect the company’s books of account or other company documents.[1] Indeed, until amendments to the Companies (Winding up and Miscellaneous Provisions) Ordinance Cap 32 (“Cap 32”) which commenced operation in 2005, there was also no general statutory right for members to inspect the company’s books of account or other company documents. Section 152FA in Cap 32 was introduced in 2005 as part of the corporate governance reforms to bolster the rights of minority members in a company. 42.Section 740 of the Companies Ordinance Cap 622 (“Cap 622”) provides that the court may order inspection of records or documents by a company’s members. Such provision is similar to section 152FA of Cap 32 which provides for inspection of specified corporations’ records by members. Which provision is applicable? 43.The Companies Ordinance (Commencement) Notice 2013 (LN 163/2013) published on 21 October 2013 specified for the main part of Cap 622 (including Part 14) to come into operation on 3 March 2014. Paragraph 127 of Schedule 11 of Cap 622 provides inter alia that section 152FA of Cap 32 continues to apply in relation to (a) an application made before the commencement date (ie 3 March 2014) of Division 5 of Part 14 for an order for inspection under section 152FA of Cap 32 as in force immediately before its repeal, and (b) if an order for inspection is made, the inspection. In my view, since the 3rd Summons was issued after and not on/before 3 March 2014, section 740 of Cap 622 rather than section 152FA of Cap 32 is the relevant provision. 44.Section 740 of Cap 622 provides that:
45.It is clear from the above that the statutory right to inspection of records or documents under section 740 of Cap 622 is reserved for “a required number of a company’s members”. Here, the plaintiff filed the 3rd Summons on his own without the concurrence of at least four other members, and there was no evidence before me that the plaintiff himself “represents at least 2.5% of the voting rights of all members having a right to vote at” the defendant’s general meetings. As such, the plaintiff does not satisfy the criteria for invoking the jurisdiction under section 740 of Cap 622. (b) Taxation proceedings 46.Under Order 62 rule 14(d) of the RHC, the taxing master “may, in the discharge of his functions with respect to the taxation of costs – (d) direct the production of any document which may be relevant in connection with those proceedings”. Assuming that the Documents are relevant in connection with the taxation proceedings (but I do not make any such finding), the taxing master may order production of such documents. But such power is reserved to the taxing master, and a judge of the Court of First Instance has no jurisdiction to exercise such power. 47.Even though as a matter of case management, a taxing master may exercise his powers under Order 32 rule 12 of the RHC to refer preliminary points to a judge for resolution before proceeding with the substantive taxation,[2] the 3rd Summons was not a referral of the request for production of the Documents by the taxing master to this court. Rather, the plaintiff filed the 3rd Summons returnable directly to me. In my view, this court has no jurisdiction to deal with the 3rd Summons if it was made for the purpose of seeking production of the Documents for the taxation proceedings. (c) Appeal 48.It was the plaintiff’s essential argument that the Documents are relevant and necessary for the Appeal. The plaintiff claimed the Documents were not “new evidence” for the purpose of the Appeal since they were merely the defendant’s “呈當文件之欠缺遺漏”, and therefore they ought to be made available at the Appeal. But the plain fact is that the Documents are not even available as at the 1st Hearing, and unquestionably they were not before Master C Chow when she heard the 2nd Summons and made the Master Chow Order. In my view, the plaintiff is plainly trying to adduce new evidence beyond what has been made available before Master C Chow at the Appeal. 49.Order 58 rule 1(5) of the RHC provides that “[no] further evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made may be received on the hearing of an appeal under this rule except on special grounds”. The phrase “special grounds” is the same expression as in Order 59 rule 10(2) of the RHC and requires the conditions laid down in Ladd v Marshall[3] to be satisfied.[4] The Ladd v Marshall conditions are: (a) the evidence could not have been obtained with reasonable due diligence for use at the hearing below, (b) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive, and (c) the evidence must be such as is presumably to be believed. DHCJ Au-Yeung (as she then was) in Bank of China (Hong Kong) Limited v Certain Aim Limited[5] said as follows:[6]
50.Here, the defendant had disclosed the Board Resolution and Appointment Letters under the Yim 2nd Aff as early as in April 2014. The plaintiff himself had access to the Articles, and he knew of the Special Resolution, which was part of the subject matter of the originating summons and the Judgment in the present proceedings. Any Form D2A filed with the Companies Registry is accessible/available by public search. Hence, had the plaintiff thought (a) the Documents were relevant and necessary for his application to dismiss the defendant’s taxation proceedings and (b) he was entitled to require copies thereof from the defendant (which I do not agree), he could have (with reasonable diligence) made application to demand against the defendant for copies of the Documents at the time of the 1st Summons instead of doing so much later at the time of the 2nd Summons. 51.Further and contrary to the plaintiff’s submissions, I am not persuaded the Documents would have an important influence on the result of the Appeal. 52.First, I do not accept the defendant’s “呈當文件” has any “欠缺遺漏”. It must be remembered the Board Minutes and Appointment Letters were already disclosed as exhibits to the Yim 2nd Aff in opposition to the inter partes 1st Summons. There was no obligation on the part of the defendant to make full and frank disclosure or to make general discovery of documents on Peruvian Guano basis (as suggested by the plaintiff) for preparing the Yim 2nd and 3rd Affs to oppose the 1st and 2nd Summonses. The defendant could choose to exhibit what documents they consider useful for the purpose of opposing the 1st and/or 2nd Summonses. Thus, as a matter of principle, the documents disclosed in the Yim 2nd, 3rd and 4th Affs cannot be said to have “欠缺遺漏”. 53.Secondly, the plaintiff asked for a full record of the Board Minutes because the disclosed copy stated it was “部份選錄”. The plaintiff referred me to articles 49(a)-(c) and 58(b)-(d) of the Articles, but the fact that the Articles set out a need for the defendant association to keep minutes of meetings of the Board in its books and to keep a register of directors and resolutions passed at board meetings do not confer on a member any direct right to inspect them. In my view, the Articles on their own do not justify disclosure of the Documents in the context of the Appeal. 54.Anyway, at the 1st Hearing, Mr Lung confirmed that despite reference to “部份選錄”, the disclosed copy of the Board Minutes was the full record. I note paragraph (D) of the recitals mentioned the Retainer Letter (which the defendant disclosed) and various court documents (which have since been filed/served in the present proceedings). In my view, there is nothing that the request for “[the defendant’s] [the Board Meeting]完整的會議記錄” could add. 55.Thirdly, the plaintiff asked for “[the defendant]召開[the Board Meeting]前,有七位董事分別致函董事會提名另一位董事作為後補董事,現要求[the defendant]向公司註冊處登記的七份董事更改通知書(委任/離任)D2A表格”. I do not really understand the need for such documents. If, as the plaintiff claimed, no such documents could be found by a search made at the Companies Registry, this goes to a long way to support the plaintiff’s contention that no Form D2A in respect of the appointment of the Alternate Directors by the Other Directors as set out in paragraph 8(b) above has been submitted to the Companies Registry for registration. Significantly, the defendant has not adduced any evidence to rebut this. The court can be persuaded to deal with the Appeal on the basis there is no such Form D2A. On such basis, the requested documents in this respect would not have an important influence on the result of the Appeal. 56.A more significant consideration is that even if no Form D2A in respect of the appointment of the Alternate Directors by the Other Directors for the purpose of the Board Meeting has been submitted to the Companies Registry for registration, it still does not affect the validity of the appointment of such Alternate Directors. 57.Cap 32 does not make any provision for alternate directors,[7] so where the articles of association of a company are silent on this matter, directors may not appoint alternates. But a company’s articles (as in the case of the Articles) may also entitle individual directors of the company to appoint alternate directors to represent them when they are unable to attend meetings or otherwise to perform their duties as directors.[8] 58.Here, the appointment of alternate directors is permissible under article 44A of the Articles, and the defendant has disclosed the Appointment Letters for the appointment of the Alternate Directors. Once so appointed pursuant to the Articles, the Alternate Directors could personally attend and vote at the Board Meeting on behalf of the Other Directors under article 44B of the Articles. It is specious to suggest that notwithstanding the appointment of such Alternate Directors, the Other Directors still had to attend the Board Meeting in person.[9] 59.The plaintiff drew my attention to section 158(4) and (8) of Cap 32 which provides as follows:
In my view, whilst the appointment of a director or a director ceasing to hold office and any change in the existing director’s particulars have to be notified to the Registrar of Companies within 14 days by Form D2A or Form D2B, whichever is appropriate, and the consequence of default is an offence in which both the company and its officers who are in default are liable to a fine and/or daily fine, such notification of appointment of a director to the Registrar of Companies is a procedural or administrative requirement the default of which does not affect the validity of the original appointment of the relevant director and/or the validity of his act. 60.Section 157 of Cap 32 provides that “[the] acts of a director or manager shall be valid notwithstanding any defect that may afterwards be discovered in this appointment or qualification”. This ensures that company transactions are not invalidated. The company cannot avoid obligations to both members[10] and outsiders by relying on a person’s lack of entitlement to act as a director. For the present purpose, we need not be concerned with whether it will or will not absolve the director concerned from any personal repercussions that may ensue. 61.Indeed, article 56 of the Articles is even more expansive. It ensures that all acts done at any meeting of the Board or by any person acting as a director of the defendant shall be valid even if it is discovered later that there is some defect in the appointment of such director or person acting as aforesaid, and such director or person will be treated as if he had been duly appointed and qualified to be a director. 62.I am therefore not convinced the requested copies of the Form D2As for the appointment of the Alternate Directors as alternates for the Other Directors for the purpose of the Board Meeting would have an important influence on the result of the Appeal. 63.Fourthly, as regards “[the defendant]召開[the Board Meeting]通知書”, all the plaintiff could say about this was that article 59 of the Articles provides that a notice of meeting be served prior to a meeting of the Board. But as explained above, the mere existence of such a requirement in the Articles or even the existence of such a document does not give rise a direct right on the part of the plaintiff to inspect the same, or any sufficient basis in the context of the Appeal to require disclosure by the defendant. 64.At the 1st Hearing, the plaintiff claimed he wished to have sight of the notice of meeting for the Board Meeting because he wanted to find out whether such notice made specific proposals for the resolutions passed at the Board Meeting, and if not it might then be open for him to argue that the Other Directors were unaware of the matters to be discussed and resolved at the Board Meeting, and their appointment of the Alternate Directors by the Appointment Letters might be invalidated. 65.In my view, this is a classic example of a speculative fishing enquiry that must be rejected. In any event, notwithstanding the plaintiff’s suspicion (although he has not made out any basis for such concern), there is simply no evidence before me that after almost a year any of the Other Directors wants to withdraw and retract from the Appointment Letters. There is no merit to the argument. 66.Whilst I am on this point, I should add that at the hearing of the Appeal on 13 October 2014 (“2nd Hearing”), the plaintiff claimed that because he had raised this issue, the defendant was bound to disclose the notice of meeting in rebuttal. I do not agree. Even if the Articles required a notice of meeting and such notice of meeting for the Board Meeting does exist, I see no justification to require disclosure by the defendant. Matters are not put in issue simply on the say-so by a party. In any event, the absence of such notice of meeting does not invalidate the Board Meeting or the resolutions passed during such meeting. In Yip Peter v Asian Electronics Ltd,[11] it was held that the subject board resolutions were valid even if it appeared that due notice of the meeting had not been given to one of the directors. The lawfulness of a decision taken by a board meeting could not be questioned if the only fact alleged to make it unlawful was a mere informality or irregularity but where the intention of the meeting was clear. In that case, the resolutions were agreed by the majority in accordance with the articles. Returning to the present action, in my view, there is no merit to this argument by the plaintiff here. 67.In the circumstances, I am not satisfied the plaintiff has discharged the duty to demonstrate special grounds for adducing the Documents as new evidence at the Appeal. In light of the aforesaid analysis, I have dismissed the 3rd Summons at the 1st Hearing. There is no reason why costs should not follow event. I therefore grant a costs order nisi that costs of the 3rd Summons (including all costs reserved, if any) be paid by the plaintiff to the defendant to be summarily assessed and paid forthwith. III. APPEAL 68.Immediately after the 1st Hearing, the plaintiff made ex parte written application to the court to adjourn the Appeal for three weeks because he had requested for the transcript of the hearing/ruling of the 1st and 2nd Summonses respectively before/by Master K Lo and Master C Chow, and such transcripts were not yet available. He submitted that the transcripts would be highly relevant for the Appeal. 69.On the same day, I directed that the defendant be notified of the plaintiff’s ex parte application to adjourn the inter partes Appeal, and that such application be reserved for consideration at the 2nd Hearing. On 9 October 2014, the defendant’s solicitors wrote to this court (with copy to the plaintiff) to object to the proposed adjournment of the hearing of the Appeal. 70.On 9 October 2014, the defendant’s counsel lodged his written submissions and list of authorities for the Appeal. 71.On 10 October 2014, the plaintiff made an ex parte written application to the court to discontinue/withdraw the Appeal with no order as to costs, and he also wrote to advise Master K Lo that he no longer required the transcript of her oral ruling. On the same day, I directed that the defendant be notified of the plaintiff’s ex parte application to discontinue/withdraw the inter partes Appeal, and that such application be reserved for consideration at the 2nd Hearing. 72.At the 2nd Hearing, the plaintiff decided to proceed with the Appeal. In the circumstances, at the 2nd Hearing, I dismissed his ex parte written application made on 10 October 2014 for discontinuance/ withdrawal of the Appeal. 73.At the 2nd Hearing, the plaintiff submitted his written submissions. 74.In considering whether or not there are any meritorious grounds for the Appeal, it must be remembered that an appeal from a master to judge in chambers is dealt with by an actual rehearing of the application which led to the order under appeal, and the judge treats the matter as though it came before him/her for the first time. The judge is in no way bound by the master’s decision.[12] 75.By the Master Lo Order, the 1st Summons was dismissed and the defendant was awarded the Assessed Costs. In fact, Master K Lo stood down the hearing of the 1st Summons to enable the plaintiff to obtain the Latest AR, and it was only after sight of the Latest AR that she dismissed the Summons. In the circumstances, the Master Lo Order was a determination of the 1st Summons on the merits. This is also borne out by the contents of the Plf 1st Aff, the Yim 2nd Aff and the parties’ written submissions. There is no suggestion before me that the Master Lo Order was made on technical or procedural grounds. 76.Although the Master Lo Order was adverse against him, the plaintiff did not appeal against the order. Instead, he filed the 2nd Summons seeking the same relief as in the 1st Summons and also to dismiss the Assessed Costs. 77.The question of the Assessed Costs can be disposed of quickly. The award of the Assessed Costs in favour of the defendant under the Master Lo Order is binding on and enforceable against the plaintiff unless it is overturned on appeal. If the plaintiff is dissatisfied with the award of the Assessed Costs, the only appropriate course is to appeal against the Master Lo Order with a view to set it aside. Master C Chow has no jurisdiction to set aside any order of costs made by another master. 78.Mr Lung submitted that by way of the Plf 1st Aff, his written submissions for the 1st Summons, and his oral submissions at the hearing before Master K Lo, the plaintiff had already put the following matters in issue: (a) the validity of the appointment of Kwan Yu Kit (關汝傑) and Shum Siu Ling Patty (沈瑞玲) as directors of the defendant, (b) the validity of the Other Directors’ appointment of the Alternate Directors for the Board Meeting, (b) the failure of the Other Directors to personally attend the Board Meeting, (c) the lack of sufficient quorum for Board Meeting, (d) the validity of the resolutions passed at the Board Meeting, (e) the failure to provide him with proper minutes of the Board Meeting that authorised the commencement of taxation proceedings against him.[13] It was on such basis that the plaintiff applied under the 1st Summons to dismiss the defendant’s Application to Set Down a Bill for Taxation and/or the taxation proceedings. 79.Mr Lung submitted that for the relief sought in the 2nd Summons, ie to dismiss the defendant’s Application to Set Down a Bill for Taxation and/or the taxation proceedings (which was the same relief sought under the 1st Summons), the Plf 2nd and 3rd Affs and the plaintiff’s written submissions for the 2nd Summons relied on the same and similar grounds as for his complaint under the 1st Summons. The plaintiff relied on articles 49, 51 58 and 59 of the Articles, sections 645 and 652 of Cap 622 (which deal with the registration of the appointment/cessation of directors with the Companies Registry) to complain that (a) the disclosed Board Minutes was incomplete, (b) only four Relevant Directors personally attended the Board Meeting even though the prescribed quorum required 11 directors to be present, (c) the Other Directors should not be recorded as having attended the Board Meeting because articles 49(b) and 58(b) only permitted those present in person to be so recorded, (d) there was provision in the articles for “候補董事” (alternate director) and not for “候任董事” as referred to in the Board Minutes, (e) the Alternate Directors had not been registered as such with the Companies Registry within the prescribed time or at all, (f) the Companies Registry only showed Form D2As dated 27 February and 28 April 2014 that showed the Other Directors had appointed persons other than the Alternate Directors as their alternates on 13 January and 31 March 2014 respectively, and (f) the Form D2A for the appointment of six of the Other Directors on 11 August 2012 was only submitted to the Companies Registry on 12 May 2014 in breach of the prescribed time under Cap 32. 80.Mr Lung submitted it was clear from the above that the 2nd Summons put in issue and challenged the same subject matter as in the 1st Summons, ie whether there was sufficient quorum for the Board Meeting and hence whether the meeting itself and the resolutions passed during such meeting were valid and effective, and the plaintiff not having appealed against the Master Lo Order could not re-apply to dismiss the Application to Set Down a Bill for Taxation and/or the taxation proceedings by way of a fresh summons (ie the 2nd Summons) before another master. Mr Lung argued that Master C Chow was fully justified to dismiss the 2nd Summons and award costs on indemnity basis in favour of the defendant. 81.On the other hand, the plaintiff submitted that although the relief sought under the 1st and 2nd Summonses was the same, the basis for the application under the 1st Summons and that for the application under the 2nd Summons was different. He claimed the contention in his written submissions for the 1st Summons before Master K Lo was that the defendant in breach of article 38 of the Articles had less than 11 directors, so any meeting of the Board would be void and ineffective. Master K Lo stood down the hearing to enable the parties to obtain the Latest AR, which confirmed the defendant at that time had 12 directors, thus satisfying the requirement in article 38 of the Articles. The plaintiff claimed Master K Lo did not go on to consider whether the Board Meeting was quorate before she dismissed the 1st Summons. He argued the 2nd Summons was premised on his contention that the Board Meeting was defective for various reasons as set out in paragraph 79 above (including his objection that the Board Meeting was not quorate), which reasons and objections were different from the grounds he relied on for the 1st Summons. The plaintiff submitted that at the hearing before Master C Chow, the defendant’s solicitor failed to address these matters substantively, and merely complained (and Master C Chow held) that the plaintiff was not entitled to pursue the 2nd Summons as a result of res judicata or issue estoppel. The plaintiff submitted that since the 1st and 2nd Summonses were premised on different grounds, and the defendant failed to address the plaintiff’s substantive grounds for the 2nd Summons, Master C Chow erred in dismissing the 2nd Summons on the basis of res judicata and/or issue estoppel. 82.In Chu Hung Ching v Chan Kam Ming & ors,[14] the Court of Appeal accepted that the rules relating to res judicata and issue estoppel in interlocutory matters are less stringent than those generally applicable in that when the same issue is raised in a subsequent interlocutory application in the same action, it will not be unjust and unreasonable to allow the second application to be heard, for what is involved is not re-litigation of an identical issue of law or fact:
However, Mayo VP cited with approval Pocklington Foods Inc v R in right of Alberta[15] as follows:[16]
Indeed, in Chu Hung Ching, Le Pichon JA held that the second application in that case was “a second bite at the cherry and thus an abuse of process”.[17] 83.In M&R Marking Systems, Inc v Tse Mee Shuen Wilson also known as Wilson Tse & ors,[18] in which the 1st defendant applied to set aside default judgment on the ground that it was irregular, and after dismissal of such application he applied again to set aside the judgment on the ground it was irregular in that it was entered prematurely. Chu J (as she then was) held that the dismissal of the first application was a decision on the merits such that the doctrine of res judicata applied. She went on to say on the principles of Yat Tung Investment Co Ltd v Dao Heng Bank Ltd[19] that there might be occasions when dismissal on technical grounds would not preclude the application of the doctrine of res judicata. But more significantly, the learned judge also upheld the master’s dismissal of the second application on the basis of lack of jurisdiction:
84.Chu J (as she then was) reiterated the above principles in Re Prudential Enterprise, Limited.[20] In that case, the learned judge dismissed an application for specific discovery when an earlier application for similar documents was dismissed. In respect of the suggestion that there were change in circumstances justifying the second application, the learned judge cited with approval Buckley LJ’s observations in Chanel Ltd v Woolworth & Co as follows:[21]
85.The touchstone for application of the doctrine of res judicata or issue estoppel in the context of interlocutory applications is what is just and reasonable. Here, the Master Lo Order was a decision on merits. Indeed, the plaintiff admitted as much in the course of his oral submissions at the 2nd Hearing when he said Master K Lo dismissed the 1st Summons because she was satisfied the defendant had 12 directors after sighting the Latest AR. 86.However, I am not with the plaintiff when he suggested that the Master Lo Order and the Master Chow Order dealt with different subject matters. First, both summonses sought mirror reliefs. Secondly, the plaintiff by the Plf 1st Aff and his written submissions for the 1st Summons put the question of whether the Board Meeting was quorate squarely in issue. Both documents made express reference to article 51 of the Articles which deals with the number of directors required to meet the quorum requirement for a meeting of the Board. Thirdly, although the plaintiff’s written submissions for the 1st Summons raised other matters, paragraphs 4-5 therein squarely complain that the Board Meeting was not quorate since less than 11 directors were present. In my view, the plaintiff repeated such grounds he adopted for challenging the Board Meeting under the 1st Summons when he pursued the 2nd Summons. 87.But even if I am wrong and the plaintiff relied on different grounds for the 1st and 2nd Summonses as he suggested (but I disagree), it still does not aid the plaintiff. I refer to the observations by Chu J (as she then was) and Buckley LJ in paragraphs 83-84 above. If there are grounds that could have been advanced on the earlier occasion (and here the plaintiff could have advanced the grounds premised on the Articles, Cap 32 and the contents of the Board Minutes relied on for the 2nd Summons at the hearing for the 1st Summons), he cannot by way of the 2nd Summons fight over again a battle which has already been fought by relying on grounds that he could reasonably have advanced on the first encounter unless there has been some significant change in circumstances. 88.But with the dismissal of the 3rd Summons and for the reasons given above, the plaintiff has not raised any significant change in circumstances or new evidence that materially justifies why res judicata or issue estoppel should not apply. As Mr Lung reminded (and I agree), a competent tribunal (ie Master K Lo) has jurisdiction to decide, and if it makes a mistake the proper approach is to seek to correct it on appeal.[22] So if the plaintiff is dissatisfied with the Master Lo Order, he should appeal. In my view, it is wholly inappropriate and an abuse of process for him to re-apply for the same relief by way of the 2nd Summons. 89.But even if the doctrine of res judicata or issue estoppel does not apply, the 2nd Summons should also be dismissed on the merits. I refer to and reiterate the discussion in paragraphs 52-61 above. In particular, the Other Directors’ appointment of the Alternate Directors is supported by the Appointment Letters and permitted under articles 44A and 44B of the Articles. Under article 44B of the Articles, the Other Directors must be regarded as having attended the Board Meeting in person by the presence of their Alternate Directors. There is no basis for suggesting that the Board Meeting was not quorate because by head count only four directors were physically present. Under article 44B of the Article, the Alternate Directors “須行使並履行其代表的董事的所有職責、權力和義務”, and that necessarily included personally attending the Board Meeting on behalf of the Other Directors. Indeed, article 44B of the Articles contemplates there may be occasions when “委任其為候補董事的董事未親自出席的任何該等會議上有一票投票權(如果該候補董事也是一名董事,則其自身投票權除外)”. Hence, at the Board Meeting, Yim Chi Ming Eric (嚴志明) and Law Wai Ching (羅慧晶) wore two hats by personally attending the meeting in their own capacities and in the capacities of the Other Directors whom they respectively represented. The Articles must be read as a whole, and in my view article 58 of the Articles must be read accordingly. 90.The plaintiff complained there was no reason or justification for Yim Chi Ming Eric (嚴志明) to be appointed and it was wrong for him to be so appointed as an Alternate Director for six Other Directors. The plaintiff claimed it would create all sorts of problems, including conflict in the casting of votes at the Board Meeting on behalf of the relevant Other Directors and in his own capacity as chairman of the Board Meeting. In my view, there is no merit to this argument. There is no prohibition under articles 44A and 44B of the Articles that prevents any director from being appointed to act as alternate director for one or more other directors. Under article 44B of the Articles, such alternate director attending a meeting of the Board in person is entitled to one vote for each director whom he represents as alternate director and one vote in his own capacity (ie “並在委任其為侯補董事的董事未親自出席的任何該等會議上有一票投票權(如果該侯補董事也是一名董事,則其自身投票權除外)”). Since the resolutions at the Board Meeting were passed by majority, there is no need for me to be concerned with the chairman’s second or casting vote. There is no merit to this argument. 91.There is also no merit to the challenge against the label “候任董事” when it is plain on the Appointment Letters and the Board Minutes that the Alternate Directors were in substance appointed to act and acted as alternates to the Other Directors. Any clerical and procedural irregularity will not affect the validity of the Board Minutes. In Yip Peter, Le Pichon J said “the lawfulness of a decision taken by a meeting of members or board cannot be questioned if the only facts alleged to make it unlawful is a mere informality and irregularity and the intention of the meeting is clear”.[23] 92.As regards the suggestion that the Other Directors appointed other alternate directors in February and April 2014, it is neither here nor there because article 44A of the Articles permits the directors of the defendant “在一定時期” appoint alternate directors. The Other Directors were well entitled to appoint the Alternate Directors to act for them for the purpose of the Board Meeting as shown in the Appointment Letters. 93.As regards the complaint over the substantial delay in submitting the Form D2A in respect of the appointment of six of the Other Directors as directors of the defendant association to the Companies Registry, it is again neither here nor there for the present purpose. Such non-compliance with the statutory notification requirements may be an offence, but of itself does not affect the validity of the appointments. In any event, at the 2nd Hearing, the plaintiff assured the court that in line with the Master Lo Order he would not now dispute the defendant association had 12 directors at the time of the Board Meeting. 94.In the circumstances, Master C Chow was correct to dismiss the 2nd Summons. I also see no basis to disturb her costs order. 95.Order 62 rule 3(2A) of the RHC provides that if the court in the exercise of its discretion sees fit to make any order as to the costs of or incidental to any interlocutory proceedings, it may, subject to Order 62 of the RHC order the costs to follow event or make such order as it sees fit. There is no reason why the plaintiff should not pay for costs of the Appeal, and for all of the above reasons I hold it should be on indemnity basis. 96.I therefore grant a costs order nisi that the plaintiff do pay the defendant costs of the Appeal (including all costs reserved, if any) on indemnity basis to be summarily assessed and paid forthwith. IV. SUMMARY ASSESSMENT OF COSTS 97.For summary assessment of the two costs orders nisi in paragraphs 67 and 96 above, I grant the following directions:
V. POSTSCRIPT 98.My clerk will inform the plaintiff that if he so requires, a court translator will be arranged to verbally translate these Reasons for Decision and Judgment into the punti language for him at the High Court Building at a mutually convenient date and time.
The plaintiff acting in person and present. Mr Vincent Lung, instructed by Paul K C Chan & Partners, for the defendant. [1] see Baldwin v Lawrence (1824) 2 Sim & St cited in Lo and Qu, Law on Companies in Hong Kong para11.081 at p 497 (footnote 151) [2] see Chun Wo Construction & Engineering Co Ltd Fujita Corporation Henryvicy Construction Company Limited trading as Chun Wo – Fujita – Henryvicy Joint Venture v China Win Engineering Ltd HCCT37/2006, Lam J (as he then was) (unreported, 12 June 2008) and Hong Kong Civil Procedure 2014 Vol 1 para 32/12/1 at p 709 [3] [1954] 1 WLR 1489 [4] see Fortis Insurance Company (Asia) Limited v Lam Hau Wah Inneo HCA1840/2009, Fok J (as he then was) (unreported, 30 Mach 2010) affirmed on appeal in CACV86/2010, Kwan JA and Sakhrani J (unreported, 28 October 2010) and Falcon Insurance Company (Hong Kong) Limited v Flagship Underwriting Management Limited HCA312/2010, Sakhrani J (unreported, 22 December 2010) [5] HCMP1272/2007 (unreported, 4 October 2010) at para 17 [6] see also Falcon Insurance Company (Hong Kong) Limited at para 15 [7] Table A of Cap 32 does not have provisions for alternate directors [8] see also article 28 of Model Articles (private companies) of Cap 622 [9] see paragraphs 89-90 below [10] see Dawson v African Consolidation Land and Trading Company [1898] 1 Ch 6 [11] [1998] 2 HKC 96 [12] see Hong Kong Civil Procedure 2014 Vol.1 para 58/1/2 at p 1024 [13] see paragraphs 18-19 above [14] [2001] HKC 396 (see also Re Chime Corp Ltd (No 2) [2003] 2 HKLRD 945, Hotung v Ho Yuen Ki [2007] 4 HKLRD 384, 404-405, and Buildtech Limited v Hung Wan Construction Company Limited HCMP154/2012 (unreported, 16 February 2012) para 13) [15] (1995) 123 DLR (4th) 141, 144 [16] at p 401 [17] at p 403 [18] HCA1598/2001, Chu J (as she then was) (unreported, 20 December 2001) (see also Re Tse Mee Shuen Wilson also known as Wilson Tse, a Debtor HCB9287/2001, Kwan J (as she then was) (unreported, 1 February 2002) paras 7-8) [19] [1975] AC 581, 590 [20] HCCW594/1999, Chu J (as she then was) (unreported, 24 October 2003) [21] [1981] 1 WLR 485, 492 [22] see Spencer Bower and Hadley, Res Judicata 4th ed para 1.14 at p 6 [23] at pp 102-103 |
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