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Alan John Muir v John Robert Lampl And Another

Judgment Cited authorities 4 Cited in Precedent Map Related
Vincent
Judgment Date02 December 2004
Year2004
Citation[2005] 1 HKLRD 338
Judgement NumberHCA2666/2004
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA001172/2004 ALAN JOHN MUIR v. JOHN ROBERT LAMPL AND ANOTHER

HCA 1172/2004
HCA 2666/2004
(Consolidated)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1172 and 2666 OF 2004

(Consolidated)

____________

BETWEEN

　 　 ALAN JOHN MUIR Plaintiff
　 and 　
　 JOHN ROBERT LAMPL 1st Defendant
HUGE RETURNS ENTERPRISES INC. 2nd Defendant

____________

Before: Hon Lam J in Court

Date of Hearing: 26 November 2004

Date of Decision: 26 November 2004

Date of Handing Down Reasons for Decision: 2 December 2004

________________________________

REASONS FOR DECISION

________________________________

1. On 26 November 2004, I dismissed the Plaintiff’s application for interlocutory injunction on the ground that there is no serious issue to be tried. I now give reasons for the decision.

2. The Plaintiff and the Defendants are shareholders in a private company called Jasman Asia Limited. The Plaintiff and the 1st Defendant are directors of the company. The Plaintiff’s claim was based on Clause 4 of the Shareholders’ Agreement dated 11 March 2003. The relevant parts of Clause 4 are as follows,

“4. CONSTITUTION OF THE BOARD OF EACH OF THE COMPANY OF THE GROUP

4.1 Unless otherwise agreed in writing by the Shareholders, the number of directors of the board of the each of the company of the Group (including the Board) at any time shall consist of four (4) Directors of whom one (1) shall be appointed and may be removed at the request of Huge Returns, and three (3) at the request of Lampl and Muir in each case by written notice to the relevant company of the Group.

4.2 The initial directors of each of the company of the Group shall comprise the following persons and shall be regarded as nominated by the Shareholder(s) listed opposite each of the names:

Name Nominated by

Julian Peter Walsh Lampl and Muir

Alan John Muir Lampl and Muir

John Robert Lampl Lampl and Muir

Cheung Wang Huge Returns

4,3 Any director of the companies of the Group may at any time by notice in writing signed by him and lodged at the registered office of the relevant company of the Group or delivered at a meting of the directors, appoint any person to be his alternate director and the appointing director may in like manner at any time terminate such appointment. An alternate director may act as alternate to more than one director. An alternate director shall not be entitled to receive any remuneration from the relevant company but he shall be entitled (subject to his giving to the Company an address within Hong Kong at which notices may be served on him) to receive notices of meetings of the directors and to attend and vote as a director at any such meeting at which the director for whom he is appointed to act as an alternate is not present, and generally at such meeting to exercise all the powers, rights, duties and authorities of the director. A director who is also an alternate director shall be entitled in addition to his own vote to a separate vote on behalf of the director for whom he is appointed to act as an alternate. An alternate director shall be entitled to sign a resolution in writing of the directors pursuant to Articles of Association of the relevant company of the Group. An alternate director shall automatically cease to be an alternate director if the director for whom he is appointed to act as an alternate ceases for any reason to be a director. Every person acting as an alternate director shall be an officer of the relevant company of the Group, and shall alone be responsible to the relevant company of the Group for his own acts and defaults, and he shall not be deemed to be the agent of or for the director of whom he is appointed to act as an alternate.

4.5 The Shareholders shall be entitled at any time by notice in writing to the relevant company of the Group to require the removal or substitution of any director appointed at the request of such Shareholder(s) and other Shareholders shall agree to use their respective best endeavours to procure the removal or substitution of such director when so requested by any other Shareholder(s). The Shareholders and the relevant company of the Group shall be indemnified in full by the Shareholder(s) removing a director appointed at the request of such Shareholder(s) against any claim by such director for unfair or wrongful dismissal and/or other compensation arising out of such removal (except for remuneration or disbursements to which the removed director is lawfully entitled or incurred prior to his removal).

4.6 A director shall be entitled to inform the Shareholder(s) nominating him of all matters concerning the Group’s Business, and each Shareholder receiving such information undertakes to keep the information confidential pursuant to Clause 14.”

3. A notice dated 30 October 2004 called for an Extraordinary General Meeting of the company to be held on 29 November 2004. The meeting is to considered the following motion,

“That [the Plaintiff] be removed from the Board of Directors of the Company on the grounds that he has knowingly and intentionally contravened the clear and lawful instructions of the Board and has failed to act in the best interests of the Company.”

4. The Plaintiff’s case was that the motion, if carried at the meeting, would constitute a breach of the Shareholders’ Agreement, in particular Clause 4.

5. Although the application was taken out by way of an ex parte summons dated 23 November 2004, it was actually proceeded with by way of inter parte application. Both sides filed evidence and I heard respective submissions from Leading Counsel acting for the parties. The injunctive relief sought is as follows,

“1. the Defendants, whether by themselves and/or by their agents, servants or otherwise however be restrained, up to and including the adjourned hearing of this summons or until further order of the Court, from voting in favour of the following resolution at the extraordinary general meeting of Jasman Asia Limited scheduled for 29 November 2004 or other resolution to the effect of removing or procuring or effecting the removal of the Plaintiff from the board of Jasman Asia Limited:-

“THAT Mr Alan Muir be removed from the Board of Directors of Jasman Asia Limited on the grounds that he has knowingly and intentionally contravened the clear and lawful instructions of the Board and has failed to act in the best interests of the Company” ”

6. The matter came before me as one of the Summons Day application. Due to the fact that I have another Summons Day application to be dealt with, time was somewhat limited. In the light of that, with the agreement of the parties, I decided to hear submissions on the question of triable issue first. Having done so, I came to a clear conclusion that there is no triable issue in the case and there is no need to hear submissions on balance of convenience.

7. The first issue is whether on proper construction, Clause 4 gives the Plaintiff any immunity from being removed as a director of the company. I shall call this the construction issue. The second issue is if the clause has such effect, whether it could be relied upon as between the Plaintiff and the Defendants to circumvent Section 157B of the Companies Ordinance Cap. 32 which provides,

“(1) A company may by ordinary resolution remove a director before the expiration of his period of office, notwithstanding anything in its memorandum or articles or in any agreement between it and him …”

I shall call this the public policy issue.

8. On the construction issue, Mr Smith SC failed to persuade me that Clause 4 had the effect of prohibiting the other shareholders from voting in favour of a motion to remove the Plaintiff as a director. As I see it, the combined effect of Clauses 4.1, 4.2 and 4.5 only gives the Plaintiff a contractual right vis-à-vis the other shareholders to have a representative in the board. Clause 4.5 gives the Plaintiff a right to replace his nominee if he for one reason or another he wants to do so. That provides one of the means by which such nominee could be removed from the board. But it does not follow that this is the only means. The clause is simply silent as to whether the other shareholders could exercise their statutory right under Section 157B to remove a director. The whole scheme is to ensure that the Plaintiff could have his representative in the board and so long as the other shareholders are prepared to accede to the Plaintiff’s bona fide nomination, there is no breach of the clause even though a previous nominee had been properly removed by the other...

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