HCMP 1417/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1417 OF 2010

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D E C I S I O N

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1.  I have before me an originating summons for orders under sections 111(2), 114B and 122(1B) of the Companies Ordinance.  The 1^st respondent (“company”) is a company limited by guarantee. It has 2 classes of members:  members and associate members.  Only the former is entitled to vote at general meetings, although the associate members are entitled to attend them.   Since 1 April 2006 the company has only had 1 full member: the applicant.  It has 3 associate members: the 2^nd to 4^th respondents. Its articles provide that 2 members are required for a quorum at a general meeting.  As it currently has 4 members registered in the share register section 114AA does not apply.  As a consequence the company has since 1 April 2006 been unable to conduct an annual general meeting and at it lay before the company its profit and loss account or income and expenditure account, as the case may be, as required by the combined effect of sections 111(1) and 122(1) of the Companies Ordinance.  The present application is made to cure these defaults.  I am told the company is addressing the changes that need to be made to its constitution to resolve the present problem.

2.  On 28 August 2010 the Hong Kong Rifle Association issued an inter partes summons applying for leave to be added as a respondent in order to contest the application.  The Hong Kong Rifle Association is neither a member nor an associate member of the company.  I note at this juncture that the 2^nd to 4^th respondents support the applicant’s application and the 2^nd and 3^rd respondents, like the applicant, object to the application for joinder.  The 4^th respondent has no view of the joinder application.  The Hong Kong Rifle Association’s application is supported by an affirmation of Fung Cheuk Nang Clement.  Mr Fung goes into some detail describing the circumstances in which the Hong Kong Rifle Association ceased to be a member of the company and the grievances it has about the applicant.  It also argues that the Secretary for Justice should be joined as a party.  The Secretary for Justice was informed of this application and on 2^nd September 2010 wrote to the applicant’s solicitors informing that it saw no need to be represented at the present hearing.  None of what Mr Fung says seems to me to come close to demonstrating sufficient interest to justify allowing the Hong Kong Rifle Association to be joined as a party and contest the present application.  I dismiss the application and order that the Hong Kong Rifle Association pays the applicant and 2^nd to 4^th respondents’ costs of its application on an indemnity basis.

3.  So far as the substantive application is concerned I am satisfied that it is impracticable for the company to conduct a general meeting without an order of the court and that it is desirable that a general meeting is convened in order that the company can comply with sections 111(1) and 122(1).  This also requires an extension of the time for laying before the company in general meeting its profit and loss account or income and expenditure account.  The factors to which the court generally has regard when considering applications under section 122 were summarized by me in Yu Sun Say v HKI Properties Limited HCMP 2556-2561, 2563, 2565-2568/2007 and adopted by Kwan J (as she then was) in Re Sanliuyidu (Hong Kong) Sports Goods Co. Limited [2009] 4 HKLRD 708.  They are as follows:

(1) Whether the shareholders were aware of the financial position of the company in question and thus were not prejudiced by non-compliance;

(2) Whether the default was inadvertent; and

(3) Whether the court is satisfied that the company would comply with the obligation to lay its profits and loss accounts or income and expenditure statements before general meetings in future.

4.  The evidence before me focuses on the inability to conduct a general meeting rather than these criteria.  However, this is not a trading company and the associate members have all agreed to the application, which has been necessitated by the unusual circumstances in which the company finds itself, which I am told, and have no reason to doubt, will be addressed. I will, therefore, make an order generally in the terms of the originating summons although there are some minor amendments that I will now discuss with counsel.