HCMP 4574/2003








IN THE MATTER of Section 114B of the Companies Ordinance (Cap. 32) and Order 102 Rule 2 of Rules of the High Court




Coram: Hon Kwan J in Chambers

Date of Hearing: 14 January 2004

Date of Decision: 14 January 2004




1. On 12 November 2003, I made an order on the originating summons issued by Mr William Thomson under section 114B of the Companies Ordinance, Cap. 32, giving him leave to convene a general meeting of United Land Network Technologies Ltd (“the Company”) and that one memberof the Company personally present is to constitute a quorum. After the decision was given, Mr Alan Maxfield arrived in court indicatingthat he wished to be heard in opposition, notwithstanding that he is not a party to the application. I gave directions that the orderI made on 12 November 2003 should not be sealed and perfected, and the decision on 12 November 2003 is not to be released for publication,pending a further hearing to resolve if Mr Maxfield does have locus to be heard on the application and, if so, whether the orderon 12 November 2003 should be set aside. I also gave directions for Mr Maxfield to file evidence if he so wished.

2. The only respondent in the originating summons is the Company, and the originating summons and supporting evidence were served atits registered office in Pokfulam Road, being the property purchased in the name of the Company with an equal contribution of fundsby Mr Thomson and Miss Unsay, the other shareholder and director of the Company.

3. Mr Maxfield claims to be the alternate director of Miss Unsay. As such, and provided it is established to the satisfaction of thecourt he has been validly appointed, he has a right to be heard on this application. Mr Maxfield has produced:

(i) a notification of changes of secretary and directors appointing him as alternate director with effect from 13 November 2003 signedby Miss Unsay and registered at the Companies Registry on the same say (Form D2);

(ii) a consent to act as the alternate director for Miss Unsay with effect from 13 November 2003 signed by him and also registeredin the Companies Registry (Form D3); and

(iii) a resolution dated 11 November 2003 purported to be passed under article 17(c) of the Articles of Association signed by MissUnsay alone resolving that he be appointed as her alternate director under article 16 with immediate effect.

4. I understand the above documents were prepared by the company secretary as well as a resolution to be signed by Mr Thomson resolvingthat Mr Maxfield was to be appointed as the alternate director of Miss Unsay but Mr Thomson had refused to sign that resolution.

5. Article 16 of the Articles of Association is in these terms:

“A Director who is abroad or about to go abroad may appoint any person to be an alternate or substitute Director during his absenceabroad, and such appointment shall have effect, and such appointee whilst he holds office as an alternate Director shall be entitledto notice of meetings of Directors, and to attend and vote thereat accordingly; but he shall not require any qualification, and shallnot be entitled to receive any remuneration from the Company, and he shall ipso facto vacate office if and when the appointor returnsto Hong Kong or vacates office as a Director, or removes the appointee from office, and any appointment or removal under this Articleshall be effected by notice in writing sent to or left with the Company under the hand of the Director making the same.”

6. It is clear from the above that it is not necessary to have the consent of Mr Thomson for Mr Maxfield to be appointed as the alternatedirector of Miss Unsay. All that is required is that Miss Unsay is abroad or is about to go abroad and the appointment is to be effectedby notice in writing sent to or left with the Company under the hand of the director making the appointment.

7. Mr Thomson challenges the authenticity of the documents signed by Miss Unsay appointing the alternate director and queries if sheis resident abroad. He alleges that an e-mail of Miss Unsay dated 8 October 2003 was not in fact received by his solicitors, furtherthe documents presented to the Companies Registry for registration purported to be presented by the company secretary when that wasnot the case.

8. On 11 December 2003, I adjourned the hearing to today for Mr Maxfield to file further evidence to satisfy the court that Miss Unsayhas been and still is residing abroad and for details to be provided of her residential address and the relevant documents to beexhibited.

9. Mr Maxfield has filed an affidavit on 2 January 2004 exhibiting a letter from Miss Unsay posted in Guam, USA dated 15 December 2003and various personal documents of Miss Unsay, being her passport, her marriage licence and her visa, certified by a notary publicin Guam to be true copies of the original documents. It would appear from these documents that Miss Unsay has left Hong Kong on 4November 2002 and she got married in USA on 16 November 2002. She has been residing in an address in Guam and is not able to returnto Hong Kong at present as she has to look after her infant child.

10. I am satisfied that Article 16 has been complied with in that since November 2002 Miss Unsay has been and is residing abroad andher appointment of Mr Maxfield as her alternate director in November 2003 during her absence abroad is valid.

11. Section 114B is a procedural section, it does not enable the court to resolve a deadlock between the shareholders by allowing one50% shareholder to override the wishes of the other shareholder. The question here is whether it is impracticable for a general meetingto be held. It is Mr Thomson’s case that it is necessary to hold a general meeting to appoint an additional director so that theCompany can function. If an alternate director has been validly appointed, there would be quorum for a directors’ meeting and itmay not be necessary to hold a general meeting for the purpose of appointing an additional director.

12. Although the alternate director was appointed belatedly in this instance, this would appear to resolve the problem of a lack of quorumfor a directors’ meeting to be held. I note that there is no indication in Mr Maxfield’s latest affidavit that he will not attendany board meeting that may be convened, provided he is given proper notice of it and he has related the wishes of Miss Unsay to begiven a proper agenda so she can give him instructions on how he should vote at such meeting. Mr Maxfield has also given the e-mailaddress of Miss Unsay in the event that Mr Thomson should wish to serve notice on Miss Unsay of any general meeting by e-mail. Healso indicated that notification given to Miss Unsay of any general meeting would give her the opportunity of appointing a proxyto attend the general meeting.

13. In the circumstances, it does not appear to me to be impracticable for a directors’ meeting or a general meeting to be held and acase is not made out for relief under section 114B of Cap. 32. I was asked by Mr Thomson’s solicitor to stand over the applicationto see whether Miss Unsay would attend the general meeting to be convened in person or by proxy, after notice of the general meetingis to be served on her. It seems to me there is no point in dragging the matter on. In any event, the message to Miss Unsay is clear,she must by now realise that if the other shareholder should find it impracticable to hold a general meeting due to lack of quorum,the Court has power under section 114B to resolve the procedural deadlock. Hence, provided proper notice of the general meeting isgiven to her, she should attend in person or by proxy.

14. For the above reasons, I set aside the order I made on 12 November 2003 which has not been sealed or perfected. I dismiss the originatingsummons issued by Mr Thomson.

15. The steps taken by Miss Unsay to appoint an alternate director were only taken after the Company was served with the originatingsummons. I am not satisfied she had made any serious attempts to communicate with Mr Thomson before that. Miss Unsay did not giveany or any proper notice to the Company or to Mr Thomson of her residence abroad. The affairs of the Company were left unattendedwhen she left Hong Kong. Mr Thomson was, in my view, justified in issuing the application. However, I do not think he is justifiedin persisting with the application or in disputing the validity of the appointment of the alternate director. In the circumstances,I accede to the submission of Mr Thomson’s solicitor that an appropriate order in this instance is to make no order as to the costsof his application.

(S Kwan)
Judge of the Court of First Instance
High Court


Mr John Ip, of John Ip & Co., for the Applicant

The Respondent, United Land Network Technologies Ltd, not represented

Mr Alan Maxfield, the alternate director, appearing in person