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W. Haking Enterprises Ltd v Wong Ignatius Wan Chiu And Another

Judgment Cited authorities 4 Cited in Precedent Map Related
Vincent
Judgment Date10 February 2004
Year2004
Judgement NumberDCCJ6048/2002
Subject MatterCivil Action
CourtDistrict Court (Hong Kong)
DCCJ006048/2002 W. HAKING ENTERPRISES LTD v. WONG IGNATIUS WAN CHIU AND ANOTHER

DCCJ006048/2002

DCCJ6048/2002

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 6048 OF 2002

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BETWEEN
寶源基業有限公司
(W. HAKING ENTERPRISES LIMITED)		 Plaintiff
AND
WONG IGNATIUS WAN CHIU 1st Defendant
WONG SIU LING 2nd Defendant

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Coram: His Honour Judge L. Chan

Date of Hearing: 11, 15 and 16 September 2003

Date of Handing down Judgment: 10 February 2004

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JUDGMENT

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Background

1. The plaintiff W. Haking Enterprises Ltd. was incorporated in January 1956. One of its funding members was Dr. Haking Wong. The 1st defendant ("D1") and the 2nd defendant ("D2") are two of his children. They are also shareholders of the plaintiff each holding 11,749 shares out of a total of 1,056,869 issued and allotted shares.

2. D1 was appointed a director of the plaintiff on 3/5/1991 and made a managing director on 1/6/92. For his position as a director, he was given an annual director's fee of HK$5,000. In 2002, his position of managing director carried a monthly salary of HK$138,470.00. His employment contract was made orally and without any record in writing. The employer's returns filed by the plaintiff in respect of his employment income for the financial years ended 31st March 1988 to 1991 stated that he was a consultant. The return for 1992 stated that he was a manager. The returns for 1993 to 2002 stated that he was a managing director. Apart from these engagements, there is no evidence to indicate that he was engaged by the plaintiff in any other executive or salaried position.

3. D2 first became a salaried employee of the plaintiff in 1969. She was appointed the company secretary in 1985 and was thereafter appointed a director on 1/11/85. She was appointed by the plaintiff's board to be the chairman of the plaintiff on 8/5/00 on the proposal of the then sole chairman Dr. Pauline Chan who was resigning. For her position as a director, she was given an annual director's fee of HK$5,000. In 2002, her positions as secretary and chairman carried a monthly salary of HK$138,470.00. Her employment contract was also made orally and without any record in writing. The employer's returns filed by the plaintiff in respect of her employment income for the financial years ended 31st March 1988 to 1991 stated that she was an account scrutinizer. The returns for 1992 to 1995 stated that she was a manager. The returns for 1996 to 2000 stated that she was the deputy chairman. The returns for 2001 and 2002 stated that she was the chairman. There is no evidence to indicate that part of the salary was to remunerate her work as the company secretary. She also said in evidence that she was the finance director and this was not challenged.

4. On 18/1/02, a member of the plaintiff Madam Chung Hoi Yen submitted a requisition letter to the board under section 113 of the Companies Ordinance, Cap. 32 to convene an EGM to pass a special resolution to forthwith remove D1, D2 and one Ernest Wong Wan Chee ("Ernest Wong") as directors of the plaintiff. D1, D2 and Ernest Wong were then the only directors of the plaintiff. Madam Chung's letter said that the objects of the EGM were:

1) To pass a special resolution to forthwith remove Ms. Wong Siu Ling (D2), Mr. Wong Wan Chee Ernest ("Ernest Wong") and Mr. Wong Wan Chiu Ignatius (D1) as directors of the Company;

2) Conditional upon the passing of the special resolution described in (1) above, to pass an ordinary resolution to appoint Dr. Tai Chak-Leung Tony ("Tony Tai"), Dr. Lo Tai-chin and Mr. Chan Wing Kee as directors of the Company to fill the vacancies created by the removal of directors pursuant to such special resolution; and

3) Failing the passing of the special resolution described in (1) above, to pass an ordinary resolution to forthwith determine the tenure of the offices of Mr. Wong Wan Chee Ernest and Mr. Wong Wan Chiu as Managing Directors of the Company.

5. The board did not react to the requisition and Madam Chung on 15/2/02 issued a notice under section 113(3) of the Ordinance to convene an EGM at 10:30 a.m. on 11/3/02 seeking to pass the same resolutions as contained in her requisition referred to above.

6. On 7/3/02, D1 tendered resignation from his office as director as well as his salaried office as managing director of the plaintiff. On the same day, D2 also tendered her resignation as director, chairman and company secretary of the plaintiff. Also on the same day, the board of the plaintiff composed of D1, D2 and Ernest Wong resolved as follows:

"3) It was noted that an Extraordinary General Meeting ("EGM") of the shareholders of the Company was to be held at 10:30 a.m. on 11th March, 2002 at which it was proposed to pass a special resolution to remove the current directors of the Company forthwith and to appoint by ordinary resolution Dr. Tai Chak-leung Tony, Dr. Lo Tai-chin and Mr. Chan Wing Kee as directors in their place.

4) In view of this Miss Wong Siu Ling and Mr. Ignatius Wong offered to resign as directors of the Company and also, in the case of Mr. Ignatius Wan Chiu Wong, as Managing Director of the Company and, in the case of Miss Wong Siu Ling, as Chairman and Company Secretary of the Company.

5) Miss Wong Siu Ling declared her interest and did not vote. Mr. Ernest Wan Chee Wong and Mr. Ignatius Wan Chiu Wong then RESOLVED to accept her resignation with effect from 9:30 a.m. on Monday 11th March, 2002 and, in view of the forthcoming EGM to be held at 10:30 a.m. on Monday 11th March, 2002 at which new directors would be appointed to the Company, not to require her to work as an employee of the Company but instead to pay her 2 months' salary in lieu of notice and/or by way of compensation for her loss of office and all her accrued benefits and entitlements up to 10th March, 2002 by way of a banker's cashier order.

6) Mr. Ignatius Wan Chiu Wong declared his interest and did not vote. Miss Wong Siu Ling and Mr. Ernest Wan Chee Wong then RESOLVED to accept his resignation with effect from 9:30 a.m. on 11th March, 2002 and, in view of the forthcoming EGM to be held at 10:30 a.m. on 11th March, 2002 at which new directors would be appointed to the Company, not to require him to work as an employee of the Company but instead to pay him 2 months' salary in lieu of notice and/or by way of compensation for his loss of office and all his accrued benefits and entitlements up to 10th March, 2002 by way of a banker's cashier order.

7) Mr. Ernest Wong wishes to record that the offer of payment to any of the directors in lieu of notice and/or compensation for loss of office does not constitute waiver of any of their potential claims for loss of office."

7. Pursuant to these resolutions, D2 on 9/3/02 caused the plaintiff to pay D1 and herself sums including the 2 months' salary for each of them.

Causes of Action and Grounds of Defence

8. In this action, the plaintiff sued D1 and D2 for the return by each of them the 2 months' salary. The plaintiff said that D1 and D2 had tendered their resignations as salaried employees and were thus not entitled to any payment in lieu of notice in respect of the termination of their employments. Thus, the plaintiff said that such payments were for loss of office or in connection with their retirement from the plaintiff's board as directors. Since the payments had not been disclosed to members of the plaintiff or approved by the members in general meeting under section 163 of the Companies Ordinance, they were illegal or void. Section 163 reads:

"163. It shall not be lawful for a company to make to any director or past director of the company any payment by way of compensation for loss of office, or as consideration for or in connexion with his retirement from office, without particulars with respect to the proposed payment (including the amount thereof) being disclosed to the members of the company and the proposal being approved by the company. (Replaced 6 of 1984 s. 120) [cf. 1948 c. 38 s. 191 U.K.])"

9. In this connection, I should also refer to section 163D(3)(a) of the Ordinance which was also relied on by the plaintiff in its opening and final submissions. It reads:

"163D. (3) References in sections 163, 163A and 163B to payments to any director of a company by way of compensation for loss of office, or as consideration for or in connexion with his retirement from office-

(a) include any such payments to him in respect of the loss of or retirement from his office as director of the company or in respect of the loss or retirement, while a director of the company or on or in connexion with his ceasing to be a director of the company, of or from-

(i) any other office in connexion with the management of the company's affairs; or

(ii) any office as director or otherwise in connexion with the management of the affairs of any subsidiary of the company;

10. Furthermore or in the alternative, the plaintiff said that the payments were made by it as a result of mistake of law namely that the plaintiff thought that such payments did not require to be approved by the plaintiff. The plaintiff thus sought repayment on the basis of money had and received.

11. As a further alternative, the plaintiff said that D1 and D2 owed the plaintiff the duties (i) to act bona fide in the best interest of the plaintiff; (ii) to act for the proper purposes of the plaintiff in relation to its affairs and (iii) to avoid conflicts between their personal interests and that of the plaintiff. The plaintiff further said that such payments were made in breach of such duties and should thus be repaid by the defendants.

12. The defendants' amended defences are in the...

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