BRAVE VENTURE LTD v. XINHUA NEWS MEDIA HOLDINGS LTD AND OTHERS

HCMP 1901/2017
and HCMP 2267/2017

[2020] HKCFI 2178

(Heard together)

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1901 OF 2017

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________________________

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IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2267 OF 2017

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________________________

________________________

(Heard together)

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REVIEWS OF TAXATION

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Application

1.  There are two reviews of taxation before this Court.

Background

2.  The plaintiff (“BVL”) was at all material times a shareholder, holding 11.97% of issued share capital, of the first defendant (the “Company”), a listed company in Hong Kong. 

3.  In August 2017, the Company announced, inter alia, that it would acquire a company (“Mighty Capital Group”) at $40 million. BVL found the transaction highly suspicious.  As the annual general meeting (“AGM”) of the Company was to be held on 29 September 2017, BVL took steps to try to nominate five individuals so that they could enter into the board to investigate into the transaction.  Parties disputed whether the steps taken by BVL were valid or not.   

4.  Time was short and BVL decided to resolve the disputes by legal means.  About three weeks before the AGM, on 7 September 2017, BVL commenced HCMP 1901/2017 (the “first action”) against the Company and 9 other directors/officers of it.  BVL sought, inter alia, reliefs from the court so that the five individuals were to be put for election at the AGM.  On the same date, a summons seeking interim measures was also issued.  

5.  On 12 September 2017, BVL appeared before the Hon Mimmie Chan J for the interim measures.  It was represented by one senior counsel and one junior.  The Company was represented by 3 counsels, including 2 leaders and one junior.  Some of the defendants appeared in person when some were absent.  After argument, the learned Judge granted the interim reliefs sought by BVL.  

6.  About a week later, on 18 September 2017, reasons for decision was handed down.  The Judge explained that the defendants had been in breach of Article 16 of the Company.  The nomination notice served by BVL contained all necessary information.  It was wrong for the Company to ask for more.  The Company was also incorrect to hold that the nomination by BVL was invalid.  BVL succeeded overall in the application and the Judge made an order nisi (subsequently becoming absolute) that the defendants jointly and severally were to pay BVL costs of the summons and of the Originating Summons, including costs on 12 September 2017, with certificate for 2 counsel, to be taxed, if not agreed.  

7.  It appeared that the Company and other defendants did not comply with the order of the Judge.  On 20 October 2017, BVL obtained leave from the Judge to commence committal proceedings[1].

8.  In the meantime, on 16 October 2017, BVL also issued HCMP 2267/2017 (the “second action”) against the Company and 11 directors/officers of it.  Briefly, BVL said that the Company and/or other defendants had wrongly issued adjournment/withdrawal notice for the AGM.  They, together with all related announcements, circulars, etc. should be held as invalid, void and/or of no effect.  Further, the court should also hold that the AGM had been validly convened and concluded.  The poll result thereof was to be published accordingly.  

9.  BVL managed to meet Deputy High Court Judge Kent Yee ex- parte on notice the next day on 17 October 2017 seeking interim reliefs.  However, the Judge refused the application by a written decision handed down on 18 October 2017.  He said, among others, that discretion should not be exercised to grant interim injunctions sought.  He also disapproved the way BVL had prosecuted the application.  Neither the court nor the defence was given proper time to prepare.  He dismissed the application with no order as to costs.  

10.  Notwithstanding it, BVL took up the matter in the same way to the Court of Appeal the next day on 19 October 2017 by CAMP 42/2017.  It was dismissed again.  By reasons for decision handed down on 31 October 2017, the Hon Lam VP explained, inter alia, that it was not a proper case for granting ex parte relief. The Court of Appeal did not make any order for costs.  

11.  On 28 December 2017, BVL filed a notice wholly discontinuing the second action. 

Taxations and reviews

12.  On 10 September 2018 and 12 October 2018, BVL and the Company filed their respective bills of costs in the two actions.  I dealt with them together for 2 days in November 2019.  The Company (as paying party in the bill of the first action and receiving party in the bill of the second action) applied for the present two reviews of taxation.  

13.  After hearing from the experienced law costs draftsmen (“LCDs”) acting for parties, Mr H Wu for the Company and Mr N Yu for BVL, I reserved my decisions to be handed down.  Here they are.  

The first action: Counsel fees for both senior and junior counsel

(Section B.1 Item nos 1 to 10)

14.  Within about 2 weeks’ time, from 30 August 2017 to 12 September 2017, the junior counsel perused the documents sent to her, conducted legal researches, met with and advise BVL in conferences, drafted/settled the Originating Summons, affirmations and other documents, liaised with her instructing solicitors and senior counsel, and appeared with her leader before the Judge on the interim measures application and finally, succeeded in the same.  She adopted an item-by-item approach to charge her fees.  There are altogether 9 items. 

15.  On the other hand, within similar time frame, the senior counsel adopted a conventional approach to levy one single brief, covering his fee for attending court before the Judge and all other incidental work done by him. 

16.  At the taxation, having considered the seniority and experience of both counsel as well as other relevant matters referred to by the parties, I agreed to allow the hourly rate charged by junior counsel at $5,500 per hour.  As to senior counsel, his hourly rate was not known.  Given his experience and work done in the matter, I adopted a hypothetical range of about $12,000 to $15,000 for him.  Further, upon perusal of the correspondence, telephone and conference notes, draft and revised documents, legal research and all papers prepared by Counsel, I made some deductions from 8 items, out of a total of 9, for the junior counsel.  As to the brief of the leader, I allowed it in full.  

“SECTION B: Disbursements

B.1: Counsel’s Fees

17.  By the present review, the Company, as paying party, challenged all the decision at the taxation over fees of both counsel. Mr Wu’s arguments can be summed up as follows. 

(1) The hourly rate allowed for junior counsel was excessive.  

(2) The proper test as indicated in Bond Speed Ltd v Goodwell Sam Cheong Grocery Co Ltd, CACV 90/2010 was not adopted.  

(3) Unnecessary or excessive time was claimed by junior counsel for drafting and reviewing the originating summons, injunction order, affirmation and Cayman Islands law opinion. 

(4) A total of 36 hours was allowed by the court for item nos 1 to 8.  A further 20 hours for the brief fee for junior counsel was excessive especially when she was instructed from the very beginning of the case.  Skeletons from both parties were not lengthy and the hearing time before the Judge only took 2 hours.  

(5) Brief fee for senior counsel was also excessive for, among others, the involvement of junior counsel. 

18.  BVL on the other hand disagreed. Mr Yu said that:

(1) The hourly rate of $5,500 was reasonable. 

(2) The court did not adopt the wrong test at taxation.  Paragraph (5) at paragraph 62/App/28 of Hong Kong Civil Procedure 2020 at p.1335 was referred to. 

(3) The time deployed by junior counsel in drafting/settling all court documents was reasonable.  As to the supporting affirmation, it was drafted by the instructing solicitor and then settled by junior.  After further thorough discussion, the document was re-drafted and further revised.  Junior counsel did not settle the Cayman Island law opinion, but only render her advice to BVL.  

(4) Appropriate deductions were made by the court at taxation, ranging from 20% to 50% off from the fees of the junior counsel.  In fact, the court taxed off the brief of junior counsel by 40%.  It was fair reasonable and justified. 

(5) No deduction should be made to the brief fee of senior counsel because deduction had been reflected by the same in those of the junior. 

19.  Upon thought, Mr Wu has not been able to persuade me to change my rulings made at taxation.  

(1) Junior counsel was called to bar in 2003.  At the material times, she had about 14 years post qualification experience (“PQE”).  At that time, a solicitor enjoying more than 10 years PQE would usually be allowed at an hourly rate of $4,000 at party and party taxation.  Having considered the matters in (2) below, I maintained my decision that $5,500 was appropriate in the present case. 

(2) The authority raised by Mr Wu is not something new to this court.  After Civil Justice Reform, it is trite that the principle regarding taxation of counsel fee has been changed.  It has also been referred to our White Book and is referred to as from time to time during taxation.  

“(5) Since the Civil Justice Reform amended the wording of paragraph 2(5) of Part II of the First Schedule to Order 62, counsel’s fees under party and party taxation is no different from taxation of other costs and expenses – the test of “necessary or proper” is applicable (Poon Shu Fan v Wong Tin Yan [2012] 5 HKLRD 512). In applying that test the taxing master shall exercise his discretion having regard to all the relevant circumstances and in particular to the matters set out in paragraph 1(2). They are:

(a) the complexity of the item or of the cause or matter in which it arises and the difficulty or novelty of the questions involved.

(b) the skill, specialized knowledge and responsibility required of, and the time and labour expended by, counsel;

(c) the number and importance of the documents (however brief) prepared or perused;

(d) the place and circumstances in which the business involved is transacted;

(e) the importance of the cause or matter to the client;

(f) where money or property is involved, its amount or value;

(g) any other fees and allowances payable to counsel in respect of other items in the same cause or matter, but only where work done in relation to those items has reduced the work which would otherwise have been necessary in relation to the item in question.”

As at the taxation and/or at the present review, the following seven factors were and are noted. 

(a) The arguments among parties were not simple and straight forward.  They involved company law and application of them towards the Articles of the Company.  Laws of Cayman Island and some PRC matters were also involved.  

(b) Counsel demonstrated some skill and knowledge on company law as well as taking up the matter on an urgent basis.  

(c) Documents included underlying documents of the Company, Cayman Island legal opinion and report of investigation of the suspected transaction.  They filled up one box file.  

(d) Although it was primarily a local dispute, there were also some foreign elements as aforesaid.  

(e) The subject matter touched upon a suspected transaction of $40 million. 

(f) The 2 counsel adopted 2 different approaches to bill BVL.  Appropriate deductions were made in relation to junior counsel when she had been asked to assist before the commencement of the proceedings and throughout the same.  

(3) The supporting affirmation is the backbone of BVL in its application before the Hon. Mimmie Chan J. It consists of 22 pages in its body and 23 exhibits of 650 pages.  I went through them at taxation and did it again at the review.  The relevant correspondence was also produced before me to explain why the document needed to be revised.  With the deduction I made under items 3 and 8, I took the view that appropriate adjustment had been made in the circumstances.  I also take the opportunity to confirm that junior counsel did not advise on settling the Cayman law opinion but only advised her instructing solicitor and BVL on the same.  

(4) I am afraid that a mere repetition that counsel fees being excessive does not advance the argument of Mr Wu further.  

(5) In the present case, very briefly, the instructing solicitor and the junior counsel did all the ground work and brought in the expertise of the senior counsel only at the hearing before the Judge.  Although the senior counsel was only briefed to attend the hearing a few days before the same, evidence showed that he had been consulted on earlier occasions.  The senior counsel was called to bar in UK and HK in 1986 and 1991 respectively.  He further took silk in 2006.  At the material times, he had no less than 26 years PQE.  In my experience, depending on a number of different factors, an hourly rate from $12,000 to $15,000 was common for senior counsel with his standing.  Hence, by levying a brief of $300,000, it would take him to work for 20 to 25 hours.  To me, it must be within the reasonable range for him to read in, conduct further research, settle skeleton prepared by his junior, read those prepared by counsel for the Company, and prepare/attend hearing for 2 hours before a Judge.  There was no room to tax down the brief of the leader in the present case.  

The first action: Disbursements (Section B.2 Item nos 3 and 5)

20.  As the Company was incorporated in Cayman Island and the 2^nd to 10^th defendants were and are residing in PRC, a number of disbursements were spent in obtaining legal opinion on Cayman law and investigations done in the Mainland (as well translation of it).  Both necessity and quantum were challenged by the list of objection.  At the taxation, I ruled that they were necessary (as having been deployed in the supporting affidavit of BVL) and made some deduction of them.  

“B.2:Other disbursements

21.  At the present review, the Company argued that the allowed sums on 2 items were excessive.  Mr Wu submitted that:  

(a)     On item no 3, qualification of both translator and paralegal was not produced to justify their hourly rates.  Some time spent by the fee earners should be taxed off.  

(b)     As to item no 5, the 2 expert reports were short and in the form of letter only.  60 hours at the rate $3,900 was too much.  Fees from 25 August 2017 to 5 September 2017 should be taxed off because they should not be related to the 2 reports.  Printing and copying charges of US$1,876 (HK$14,727) was grossly excessive including duplication of US$125 in both of the 2 bills. 

22.  BVL disagreed.  Mr Yu argued that:

(a)     The amount charged was reasonable and fair, especially when it had included a voluntary discount of 25%.  One of the fee earners, Mr A Chan was the holders of Graduate Diploma of the HKU Space (1993) and of Master Degree of Sheffield University UK (1995).  As to Mr Jozel Jen Bage, he was a bachelor degree holder of the Beijing Language Institute (1995). 

(b)     The question of duplication was taken into account by the court at taxation.  The time taken to prepare the reports did not just base on the number of pages but actual and necessary work done.  Photocopying and printing charges in the fee notes were actual disbursements incurred.  

23.  I decline to tax off or further tax off both items of disbursements.  

(a)     The investigation report, albeit not lengthy, contained 10 pages for the original Chinese version and 9 pages for the English translation. It was an important document before the court showing that the suspicion of BVL over the acquisition of Mighty Capacity Group was real.  It contained both legal and commercial terms.  Both fee earners were charging at about $2,700.  It would be something like a junior solicitor practicing in Hong Kong.  They spent 14.1 hours together.  That took us to $38,448.  Further, they voluntarily offered a 20% discount.  To me, it was a very good deal obtained by BVL indeed.  I saw and see no reason to make any deduction at all. 

(b)     For the Cayman law opinion, it cost BVL US$40,476.  It comprised of 2 bills and a voluntary discount of 7.5% had been offered.  There were 3 fee earners involved, with hourly rates charged at US$850, US$675 and US$500.  In Hong Kong dollars, they would be about $6,630, $5,265 and $3,900.  Within the 2 bills, there were over 50 detailed time entries recorded by different fee earners.  The arguments raised by Mr Wu were indeed raised at taxation.  I, instead of went through the items one by one, adopted a hypothetical approach, i.e. I look at the end products and see how much time ought to have been spent by a fee earner (earning about an hourly rate of $4,000 in Hong Kong).  I took the view that 60 hours was appropriate and so ordered accordingly.  On top of it, I deduct the disbursement by about 10% to cater for the query raised to make it US$2,000 from US$2,211 (US$2,086 + US$125).  Mr Wu has not been able to persuade to change my ruling. 

The second action: Fees for the solicitor

(Section A, Item nos 2, 3 to 6 and 28a)

24.  In the second action, the Company is the receiving party.  It was entitled to claim costs against BVL from 16 October 2017 to 28 December 2017, i.e. commencement of the second action to filing of notice of withdrawal. Within about these 2.5 months, apart from the unsuccessful ex-parte application by BVL, parties did not take any substantive step therein.  BVL did not even file its statement of claim.  The Company complained it as “hit and run” approach.  

25.  In the Company’s bill, the solicitors asked their costs for the sum of about $450,000.  Six fee earners were involved and they claimed the office hourly rates.  At the taxation, probably rightfully conceded by Mr Wu, the hourly rates were reduced as follows. 

26.  At the taxation, I made 3 rulings which are now being reviewed. 

(a)     On item no 2, the solicitor claimed 4 hours in perusing and considering the supporting affirmation for the Originating Summons and interim injunction.  I allowed 2 hours for the purpose of the second action generally.  I did not allow any time for perusal and consideration for the ex-parte hearing because the Deputy Judge made “no order as to costs”.  Without any blessing from the court on the application, it is trite that no costs can be recovered.  

(b)     For the same reason, I also taxed off completely item nos 3 to 6, namely a total of 6 hours and 10 minutes for costs concerning for papers of the said ex-parte hearing.  

(c)     Last but not least, on item no 28 a (1 to 5), I taxed off them totally at taxation.  The solicitor claimed a total of 4 hours for perusing and considering documents relating to the appeal by BVL to Court of Appeal under CAMP 42/2017.  However, it was again an ex-parte on notice application.  The Company did not take part in it.  Similarly, no order for costs was made. 

27.  During the review, Mr Wu largely repeated what he had submitted at taxation.  He complained the conduct of BVL, including that papers were only served upon the Company in very short notice.  On the other hand, Mr Yu also reiterated, inter alia, under Order 62 rule 5 of the Rules of High Court (Cap 4A), no party should be entitled to recover any costs of or incidental to any proceedings except under an order of the court. 

28.  I am afraid that Mr Wu was not able to persuade to accept that the Company should be able to recover costs without the relevant costs order. 

Costs

29.  As to costs of the reviews, parties did make their submissions at the end of the hearing.  Costs generally follows event.  There is no reason to depart from this general rule herein.  I also agree to wrap up the matter by lump sum assessment of costs.  Here are them. 

First action:

	$
(a) Preparation for answers and taxation bundle (LCD – 4 hours)	7,200
(b) Hearing and preparation (LCD – 1 hour and 15 minutes)	2,250
(c) Costs of solicitors (solicitor at $5,000 per hour for 1 hour)	5,000
	14,450

Second action:

	$
(a) Preparation for answers (LCD – 1 hour)	1,800
(b) Hearing and preparation (LCD – 1 hour)	1,800
(c) Costs of solicitors (solicitor at $5,000 per hour for 0.5 hour)	2,500
	6,100

Disposal

30.  To sum up, I dismiss both reviews by the Company.  It will pay BVL costs of the two reviews summarily assessed at the respective sums of $14,450 and $6,100. 

Mr Nelson Yu, law costs draftsman instructed by Baker & Mckenzie, for the Plaintiff in HCMP 1901/2017 (Receiving Party) and the Plaintiff in HCMP 2267/2017 (Paying Party)

Mr Harry Wu, law costs draftsman instructed by Louis K Y Pau & Co, for 1^st Defendant in HCMP 1901/2017 (Paying Party) and the 1^st Defendant in HCMP 2267/2017 (Receiving Party)

HCMP 1901/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1901 OF 2017

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REASONS FOR DECISION

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1.  On 7 September 2017, the Plaintiff issued its Originating Summons (“OS”) in this action, seeking mandatory and prohibitive injunction orders against the 1^st Defendant (“Company”), a listed company incorporated in the Cayman Islands, and the 2^nd to 10^th Defendants who are directors of the Company, with regard to the annual general meeting of the Company which is scheduled to be held on 29 September 2017. The Plaintiff’s application is made under ss 728-730 of the Companies Ordinance (“Ordinance”), whereby the Court has power to order a party to act or refrain from acting, in the event of (inter alia) a breach of the articles of a company.

2.  By summons issued on the same day (“Summons”), the Plaintiff seeks the orders to be made in the interim of the hearing of the OS. At the hearing of the Summons on 12 September 2017, the 1^st, 5^th, 8^th to 10^th Defendants were present in Court, the Company being represented by Counsel. Leading Counsel for the Company informed the Court that as they were only served with the papers for the hearing on Friday, 8 September 2017, they regarded the hearing as an ex parte hearing, although submissions were made on behalf of the Company.

3.  After hearing the Plaintiff and the Company, I granted orders in terms of paras 1 (1) and (2) of the Summons, whereby the Defendants were ordered to:

(1) forthwith take all necessary steps to enable and facilitate the election of Mr Chow Lap King Brian, Mr Ong Chor Wei, Dr Wong Lee Ping, Mr Chau Shing Yim David and Mr Cheung Ting Kin (“Proposed Directors”) to be considered at the Annual General Meeting of the 1^st Defendant scheduled to take place on 29 September 2017 (“AGM”); and

(2) forthwith (and in any event no later than 5 pm on 14 September 2017) issue all necessary announcements, notices and/or circulars as required under the Listing Rules in relation to the election of the Proposed Directors at the AGM.

4.  The following are the reasons for my decision.

5.  The relevant provisions of the Ordinance are as follows:

“728. Application of section 729

(1) Section 729 applies if, in relation to a company-

(a) A person has engaged, is engaging, is proposing to engage in conduct that constituted, constitutes or would constitute-

(i) a contravention of this Ordinance;

(ii) a default relating to a contravention of this Ordinance; or

(iii) a breach specified in subsection (4); or

(b) a person has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do an act or thing that the person is required by this Ordinance to do.

… …

(4) The breach specified for the purpose of subsection (1)(a)(iii) … … is-

(a) a breach of the person’s fiduciary duties owed to the company in any capacity other than as a director of the company;

(b) a breach of the person’s fiduciary or other duties as a director of the company owed to the company;

(c) a breach of the company’s articles.

729. Court may order remedies

(1) The court may, on application by a member … … of the company whose interests have been, are or would be affected by the conduct or by the refusal or failure, do any or all of the following –

(a) grant an injunction, on the terms that the Court thinks fit-

(i) in the case of section 728(1)(a) … …, restraining the person from engaging in the conduct of requiring the person to do any act or thing; or

(ii) in the case of section 728(1)(b) … …, requiring the person to do any act or thing;

… …

(3) The Court may grant an injunction under subsection (1)(a)(i) … … restraining a person from engaging in conduct-

(a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in the conduct;

(b) whether or not the person has previously engaged in the conduct; and

(c) whether or not there is an imminent danger of substantial damage to any other person if the person engages in the conduct.

730. Provisions supplementary to section 729

(1) The Court may grant an interim injunction ... … on the terms and conditions that it thinks fit pending the determination of an application under section 729(1) … …

(2) The Court may discharge or vary an injunction granted under subsection (1) or section 729(1) … …”

6.  The Plaintiff holds approximately 11.97% of the total issued share capital of the Company. Its current application to the Court is premised on the Defendants’ acting in breach of the provisions of Article 116 of the Articles of Association of the Company (“Article 116”).  This provides:

“No person other than a Director retiring at the meeting shall, unless recommended by the Board for election, be eligible for election to the office of Director at any general meeting unless a notice in writing of the intention to propose such person for election as a Director, signed by a member (other than the person to be proposed for election as a Director) duly qualified to attend and vote at the meeting for which such notice is given, and a notice in writing signed by such person of his willingness to be elected shall have been lodged at the principal place of business of the Company. The minimum length of the period during which such notices are given shall be at least seven (7) days and the period of lodgment of such notices shall commence no earlier than the day after the despatch of the notice of general meeting appointed for such election and end no later than seven (7) days prior to the date of such general meeting.”

7.  The Defendants’ opposition to the Plaintiff’s application under  the Ordinance is that such application is misconceived, that no breach of the Articles of the Company has been established, and that there is no basis upon which the Court can grant any injunctive relief as the Plaintiff seeks.

8.  The chronology of events is that on 26 July 2017, the Company published a notice and a circular of the AGM (“AGM Notice”) to be held on 29 September 2017. Amongst the resolutions proposed at the AGM are the grant of mandates to the Board to repurchase shares and to issue new shares in the Company, and for the election of retiring directors.

9.  On 25 August 2017, the Plaintiff served on the Company 5 notices (“Nomination Notices”) of its intention to nominate the Proposed Directors for election as directors of the Company at the AGM, pursuant to Article 116. The Nomination Notices contained information on the Proposed Directors, and their signed notices of willingness to act as directors of the Company. In the Nomination Notices, the Plaintiff requested the Defendants to make the necessary arrangements by 1 September 2017 to enable the election of the Proposed Directors to be considered at the AGM, including the issue of the relevant announcements, notices and circulars as required by the Listing Rules.

10.  Rule 13.70 of the Listing Rules requires the Company to publish an announcement, or to issue a supplementary circular upon receipt of a notice from a shareholder to propose a person for election as a director at the general meeting, where such notice is received by the issuer after publication of the notice of meeting. Rule 13.70 further requires the Company to include particulars of the proposed directors in the announcement or supplementary circular.

11.  On 30 August 2017, the Company notified the Plaintiff to provide a certificate of incumbency of the Plaintiff and the relevant directors’ resolution of the Plaintiff, approving the issue of the Nomination Notices.

12.  In response, the Plaintiff provided to the Company on 1 September 2017 a certified true copy of its directors’ resolutions, and further informed the Company that although the Company had no ground to seek the certificate of incumbency, the Plaintiff would nevertheless arrange for the said certificate to be provided as soon as possible. Such certificate was in fact supplied to the Company later, on the same day. The Plaintiff reiterated its request for the necessary announcement, notices and circulars for the election of the Proposed Directors to be published.

13.  By its letter dated 1 September 2017 (“1/9 Letter”), the Company informed the Plaintiff that it was prepared to propose the election and appointment of the Proposed Directors “at a shareholders’ general meeting of the Company” for consideration and approval. The Plaintiff highlighted that this was not acknowledgment that the election would be put forward for consideration at the AGM.  At the same time, the Company requested the Plaintiff to provide information and documents to the Company, “to ensure that the relevant announcements, notices and circulars would contain sufficient particulars and information for the consideration by the shareholders of the Company, and that such particulars and information are accurate and complete and not misleading”. The information and documents sought in the 1/9 Letter (for ease of reference referred to hereinafter as “Particulars”) are:

(1) more detailed information on the experience of each of the Proposed Directors, pursuant to Rule 13.51 (2) (c) of the Listing Rules, particularly their working experience;

(2) documentary evidence supporting the experience, directorships in public companies, other major appointments and professional qualifications of each of the Proposed Directors;

(3) a statement by each of the Proposed Directors explaining how he proposes and how he will be able to devote sufficient time to the Company’s affairs and to discharge his duties as a non-executive director or independent non-executive director of the Company expected of him under the Listing Rules, particularly Mr Ong Chor Wei and Mr Chau Shing Yim David; and

(4) in respect of Mr Cheung Ting Kin, supporting documents showing that Brilliance Media & Communication Co Ltd was dissolved by way of the registration, that it was solvent at the time of dissolution and there was no wrongful act on the part of Mr Cheung.

14.  By a letter dated 4 September 2017, the Plaintiff’s solicitors asked the Company for an undertaking and confirmation by 6 pm on 4 September 2017, that the Company would forthwith take all necessary steps, including the issue of the relevant announcements etc required under the Listing Rules, for the purpose of enabling the election of the Proposed Directors to be considered at the AGM, and for the date of the issue of such announcements.

15.  On 6 September 2017, the Company issued its letter to the Plaintiff’s solicitors (“6/9 Letter”), stating that the Nomination Notices were invalid, as they do not comply with the requirements of the Company’s “Procedures for shareholders to propose a person for election as a director” (“Procedures”), and do not contain all the relevant information required to be disclosed under Rule 13.51 (2) of the Listing Rules (“Rule 13.51 (2)”). The 6/9 Letter refers to the Nomination Notices as “purported Notices of Nomination”, and repeats several times in the body of the letter that the Notices of Nomination are invalid (for not containing all relevant information of the Proposed Directors as required under Rule 13.51 (2) and pursuant to the Procedures), and that the Company is entitled to disregard the Nomination Notices.

16.  The Procedures relied upon by the Company state:

“1. Article 116 of the Articles of Association of the Company provides that a shareholder may give a notice in writing to propose a person other than a retiring director to be elected as a director of the Company.

2. Such notice together with a notice signed by the proposed person of his willingness to be elected and containing his information as required to be disclosed under Rule 13.51 (2) of the Listing Rules shall be given at least seven (7) days commencing no earlier than the day after the dispatch of the notice of the general meeting appointed for such election and ending no later than seven (7) days prior to the date of such general meeting and sent to the Chairman at the principal place of business in Hong Kong of the Company.” (Emphasis added)

17.  Apart from Rule 13.70 which provides for a listed company to publish an announcement or a supplementary circular upon receipt of a notice from a shareholder to propose a person as a director at the general meeting, the Company has drawn attention to Rule 13.74 of the Listing Rules, which states as follows:

“The issuer shall also disclose the details required under rule 13.51 (2) of any directors proposed to be re-elected or proposed new director in the notice or accompanying circular to its shareholder of the relevant general meeting, if such re-election or appointment is subject to shareholders’ approval at that relevant general meeting (including, but not limited to, an annual general meeting).”

18.  Rule 13.51 of the Listing Rules provides that a listed company must publish an announcement “as soon as practicable” in regard to “any changes in its directorate or supervisory committee”. Rule 13.51 (2) states that “where a new director, supervisor or chief executive is appointed or the resignation, re-designation, retirement or removal of a director, supervisor or chief executive takes effect”, the listed company “must announce the change as soon as practicable” and include the details of any newly appointed or re-designated director, supervisor or chief executive in the announcement. The details set out in Rule 13.51 (2) (a) to (x) (“Details”) include a wide range of matters, from details such as the full name of the director, positions held with the issuer and other members of the issuer’s group, experience including other directorships held in public companies and other major appointments and professional qualifications, to whether the director has been adjudged bankrupt, particulars of any unsatisfied judgments against him, particulars of whether the director has been identified as an insider dealer, etc.

19.  Notwithstanding the breadth of Rule 13.51 (2), the Company only required the Plaintiff to furnish the Particulars by its 1/9 Letter, and the issue raised is whether the Company was justified in insisting upon the Particulars, and in treating the Nomination Notices as invalid by reason of the fact that the Particulars were not furnished by the Plaintiff until 11 September 2017.

20.  It is not disputed that in seeking the injunctive relief sought, the Plaintiff has the onus of establishing a serious issue to be tried, and where the nature and extent of the interim relief sought is such that the relief will effectively dispose finally of the claim, the Plaintiff has a higher evidential burden in proving the merits of its case, that it is “at least likely to succeed at trial” (Sunlink International Holdings Ltd v Wong Shu Wing [2010] 5 HKLRD 653; Sim Kon Fah v JBPB & Co [2011] 4 HKLRD 45). Where a mandatory injunction is sought, as in this case, the Plaintiff is required to show “a strong prima facie case” and the Court must have “a high degree of assurance” that at trial, it will appear that the injunction was rightly granted (para 29/1/29 HK Civil Procedure 2017).

21.  On behalf of the Company, it was argued that there is no breach of Article 116 as alleged and relied upon by the Plaintiff as the basis of its application. According to the Company, Article 116 does not impose any positive obligations on the Company or its directors. It merely provides for the eligibility requirements of categories of persons for election as a director of the Company at a general meeting, one category being those who have been proposed by way of Nomination Notice served on the Company. Any obligation on the part of the Company to issue announcements or circulars arises under Rule 13.70 of the Listing Rules, and not under the Articles. On the Company’s case, there is no breach by the Company or the Directors of Article 116, and it is not open to the Plaintiff as a shareholder to enforce any provision of the Listing Rules which govern the relationship between the Company and the Stock Exchange. In short, the Company argued that the provisions of ss 728-730 are not triggered in the absence of any contravention of the Ordinance, any breach of fiduciary or other duties owed to the Company, and any breach of the Company’s Articles.

22.  I am satisfied, to the requisite standard required for the grant of a mandatory injunction, that the Plaintiff is likely to succeed at trial in its claim for the injunctive relief sought.

23.  Under Article 116, the Plaintiff as shareholder of the Company has the right to propose a person for election as a director at a general meeting of the Company, by lodging with the Company notice in writing of its intention so to propose, in accordance with the provisions and timeline set out in Article 116. The Plaintiff lodged the Nomination Notices on 25 August 2017, but the Company failed to confirm that it would be issuing the announcement or circular upon receipt of the Plaintiff’s Nomination Notices (as it was required to do under Rule 13.70, and would normally do upon its acceptance of a Nomination Notice served) (“Requisite Announcements”). In the 1/9 Letter, the Company asked for the Particulars to be furnished before it would prepare the Requisite Announcements.  The Defendants claim that they were only acting reasonable and responsibly in so doing.  However, in the 6/9 Letter, the Company claimed that the Nomination Notices were invalid for not including all the relevant information of the Proposed Directors as required under Rule 13.51 (2), and that the Company was entitled to disregard the same.

24.  On the expert evidence on Cayman law applicable to the Company, the Plaintiff has complied with the requirements of Article 116, and the Nomination Notices are valid. According to the Plaintiff’s expert evidence, the Procedures have not been incorporated by reference into the Articles of the Company, have no legal status under Cayman law, and any failure to comply with the Procedures does not invalidate the Nomination Notices. Under Cayman law, the Articles of the Company have primacy and cannot be added to or subtracted from by implication.  According to the Plaintiff’s expert, where a shareholder asserts rights under the Articles of the Company, which is a statutory contract, clear language is required before the Articles can be read to allow the Company to alter the legal effect of the Nomination Notices served under the provisions of Article 116.

25.  At this stage of the proceedings, I accept the evidence of the Plaintiff’s expert. In any event, even if the Procedures had been effectively incorporated to apply to the Nomination Notices served under Article 116, such as to require the information under Rule 13.51 (2) to be contained in the Nomination Notices, sensibly and reasonably read, paragraph 2 of the Procedure and Rule 13.51 (2) do not require the Nomination Notices to set out all the Details set out in Rule 13.51 (2) (a) to (x), but only such Details as may be applicable to the Proposed Directors and their nomination.

26.  In my judgment, the Nomination Notices contain the necessary information on the names, ages, qualifications and experience of the Proposed Directors, and the relevant directorships they hold, as required under Rule 13.51(2) and as applicable to the Nomination Notices. The information sought in item 1 of the 1/9 Letter was already and adequately contained in the Nomination Notices, and even the further detailed information sought by the Company was supplied by the Plaintiff on 11 September 2017.  Items 2 and 4 listed in the 1/9 Letter are not Details required under Rule 13.51 (2), but constitute supporting evidence, which was in any event provided by the Plaintiff on 11 September 2017. Item 3 listed in the 1/9 Letter is not within the information required under Rule 13.51 (2) at all, but was also furnished by the Plaintiff on 11 September 2017.

27.  There was no cause for the Company and the Defendants to treat the Nomination Notices as invalid, and to be disregarded, as claimed by the Company in the 6/9 Letter. As shareholder, the Plaintiff’s contract with the Company under Article 116 is that it would be entitled and would have the right by notice served in accordance with Article 116 to propose a person for election as a director of the Company, and that the person so nominated by the Plaintiff under Article 116 would be eligible for election to the office of director at the general meeting of the Company. The Plaintiff’s contract with the Company has been breached, when the Company failed or refused to recognize and accept the validity of the Nomination Notices served by the Plaintiff under Article 116, and to give effect to the Plaintiff’s rights as shareholder of the Company.

28.  The basis of the grant of the injunction sought by the Plaintiff is not simply the enforcement of Rule 13.70 of the Listing Rules, as Leading Counsel for the Company submits, but the enforcement of Article 116 and the rights of the Plaintiff as shareholder thereunder. To order the Company to issue the Requisite Announcements is the method of enforcing or the manifection of the Company’s recognition of the Nomination Notices, by carrying out the act in response to the Nomination Notices, and pursuant to the mandatory injunction imposed on the Defendants.

29.  I am satisfied that there is a breach of Article 116 of the Articles of the Company, within the meaning of s 728 (4) of the Ordinance, such that an injunction can be granted under s 729 of the Ordinance.

30.  The Company complained that the application for urgent injunctive relief was unwarranted, and that it was the Plaintiff which had acted unreasonably in refusing to provide the information and documents sought by the Company and in threatening legal proceedings. In my view, the Company had no basis to claim in its 6/9 Letter that the Nomination Notices were invalid and could be disregarded, and in light of the stance taken by the Company in its 6/9 Letter, and the forthcoming AGM, the Plaintiff cannot be said to have acted unreasonably in issuing the OS and the Summons on 7 September 2017. It was only at the commencement of the hearing on 12 September 2017 that the Company through Leading Counsel confirmed that it would be issuing the Requisite Announcements on or before 14 September 2017, but short of offering any undertaking to do so.

31.  I have effectively ruled that the Defendants have no defence to the claims made by the Plaintiff on the basis of the Nomination Notices.  To the extent that I have to consider the balance of convenience, I accept the submissions made on behalf of the Plaintiff, that the Defendants will not suffer any conceivable loss or damage as a result of the grant of the injunctions sought. The Plaintiff will be prejudiced and will not be adequately compensated in damages, if it is not able to nominate the Proposed Directors for election at the AGM, but has to wait for some other general meeting, after directors have been appointed or re-elected at the AGM.

32.  For all the above reasons, I granted the injunctions sought in terms of paragraphs 1(1) and (2) of the Summons. They are in my view adequate to enable and facilitate the election of the Proposed Directors to be put forward at the AGM, for consideration by the shareholders. The prohibitive injunction sought in paragraph 1(3) may be uncertain in terms of enforcement and unnecessarily wide, as it is unclear what steps may constitute “steps to prevent the election … to be considered”, to be regarded as breach of the injunction.

Costs

33.  The orders made at the hearing on 12 September 2017 were on the basis that the Nomination Notices comply with Article 116, and adequately set out the information required to be furnished for the nomination of the Proposed Directors.

34.  The parties agreed at the end of the hearing on 12 September 2017 that the orders made on the Summons have disposed of the OS, and that no further directions are required for the conduct of the proceedings.

35.  Since the Plaintiff has succeeded overall in its application for injunctive relief, the order nisi which I make is that the Defendants are to pay the Plaintiff’s costs of the Summons and of the OS, including the costs of the hearing on 12 September 2017, with certificate for 2 counsel.

Mr Russell Coleman SC and Ms Sara Tong, instructed by Baker & McKenzie, for the plaintiff

Mr Charles Sussex SC, Mr Douglas Lam SC and Mr Patrick Siu, instructed by Ma Tang & Co, for the 1^st defendant

The 2^nd, 3^rd, 4^th, 6^th, & 7^th defendants were not represented and did not appear

The 5^th defendant appeared in person

The 8^th defendant appeared in person

The 9^th defendant appeared in person

The 10^th defendant appeared in person