1948-06-17 — Page 5

THE HONGKONG TELEGRAPH, THURSDAY, JUNE 17, 1948.

CHINESE CHAMBER OF COMMERCE

DISPUTE DECISION

Court Refuses

To Interfere Institution's Affairs

With

INJUNCTION ACTION FAILS

10

directors had not been better a position and could not have) ndditional challenged the election I had delegated to the directors so as to Laken place before the end of April. exclude the inherent power of the On the face of it, therefore, the clec- company In general meeting tion having been muthorised by the appoint directors. At the conclusion requisite majority of the proper body of his Judgment (nt page 654) without damage to the plaintiffs, it Slezser L. J. used the following very would seem equitable that the Court strong words;- should refuse to interfere, but it can hardly be denied that if the failure to hold the election at a certain time

the control of their own is an irregularity, there is no time during the two-year period following company, by nominating the direc the meeting In May 1948 when tors is excluded by any contract confirming resolution would be contained in the Articles of Asso. clation-I think this appeal must be There-allowed."

nny

more effective 03 for 013 Article 32 in concerned. fore the Irregularity, exirls, canning of the

be cu

ane

"For these reasons and also be- cause I do not think that the f herent power of the corporators to direct

The type of contract referred to, I further imagine, is the ordinary procedural cured by, n general

Chamber

mber agreement embodied in the Articles without alteration of the Articles for comparable to that in the Articles which simple majority would not of the Chamber and not a contract with a particular person that he suffice. That fact renders it dimeult An application brought by certain members of the Chinese Chamber of

to distinguish this case from those. contain

If these words of Slesser thall act.

a correct statement Commerce for an interlocutory injunction to restrain the Chamber from electing

relied upon by the

(such of

there the law.

can be no members of the Committee and Supervisory Committee and to restrain any person or persons so elected from acting in such capacity was dismissed, with costs to defendants, by Mr Justice T. J. Gould (Puisne Judge) in a judgment delivered at the Supreme Court this morning.

His Lordship held that no case had been made out sufficient to constrain or entitle the Court to interfere in the affairs of the Chamber and that the plaintiffs were not entitled to the declaration or injunction naked for.

The application was brought by of April, The proceedings of the 32 must be taken to be equivalent arc im to an actual election at the general Lul Yam-thuen, Hsu Chi-lang. Lam Chamber in that month Hou-tak, Teal Ching-you Chiu portant. On the 9th, the Executive; inceting itself.

Chit Committee decided to convene

To this argument Counsel for the Yu-wah. Yung Sol-fong and

replies with the rule in Sai-cheting, members of the Cham-general meeting of members for the Chamber ber, plaintifs.

election of officers on April 22. This the case of Foss v. Harbottle 2.Ha.

under the

down the new 401, which Ind was a mistake

the ncts Articles 21 days' nolice was required ciple that when

minority of by the in place of the seven days of the plained

Improperly Articles. old

done On legal advice this meeting

and fresh was cancelled

Mr H. G. Sheldon, KC, Mr Bronk A. Bernacchi and Mr D. A L. Wright, instructed by Mr P. L. Lam, appeared for the plaintiffs,

The Chinese Chamber of Com- merce, defendants, were represented by the Hon. Leo d'Almado, KC, and Mr A. J. Clifford, structed by the Hon. Sir. Man-kam Lo, Ki.

เคย

of confirmation by

tho members,

notices were sent out for a meeting majority of

prii-

were

the

to be held on May 10. This was would not interfere; the

decision itself must be the complaining party, pursuant to a unanimous of the Executive Committee in being a matter for the majority cluding one of the plaintiffs. Finally to say whether they wished to com- ott April 20, the Executive the

An application by plaintiffs for an interim injunction to restruin Chamber at the annual meeting

Com-

Com-plai or not.

The rule has for its

as the Automatic rose) doubt that the Chamber had power which are admittedly exceptions from the rule in Counsel for the Chamber sought to so on the ground that the last mentioned case and those like I were all cases where the plaintiffs had suffered material and personal damage which was not the present case,

at a general Foss v. Harbattle to elect a committee

meeting properly called. If they go too far, nevertheless I consider that the Chamber would still have in herent power to elect a committee constitution. to solve a deadlock produced by the

by

SIMILAR DEADLOCKS Somewhat similar deadlocks were referred to in Isle of Wight Railway Co. v. Tabourdin 25 Ch. D. 320 and in Harron v. Potter 1914 1 Ch. D. 805 in which certain passages from the former case are quoted with ap- proval. At page 002 of the judg- ment in the latter:--

of

The

Then

mittre at the request of some 250 basis the following proposition which (which was held on May 19 when I members gave further consideration is quoted from Bacon, Abridgment, by way of limitation to the exception depended on the fact that it was 20

the matter of new application 10th Edition at p. 235:

Palmer's 11 260 in

Company Law, supervisors were elected)

to the from procceding to the election o! 20 for membership but reaffirmed its

"Where no special provision is members of the Supervisory

to defer them previous decision mittee of the Chamber was rejected in after the election. The above- made by the constitution of a cor- whole are bound by by the Acting Chief Justice,

of Borde Mr mentioned affirmation

13 poration, the Justice E. 11. Williams on May 18. members of the Executive Com-the acts not only of the major part

THE JUDGMENT

mitter shows that there were about but of the major part of those who 3,000 new applications to be con- are present at a regular corporate sidered, and expresses their opinion meeting, whether the number pre-rule" principle should be applied. that there was no time property to seni ben majority of the whole or scrutinise them without holding up not" the annual meeting and that their

would passing hurried! trimental to the real interests of the Chamber.

before

sions of Article 32 of the Articles of Association and (b) to restrain any person or persons so elected as mem- vers of such Committee and Super- vising Committee from acting in such capacity.

Chamber

The

ig

which

be

de-

RULE EXEMPLIFIED This rule is exemplified also the cases of Mozley v. Alston 1 Ph. 700 and MacDougall v. Gardiner 1 Cr. D. 13. Some extracts from the judgments of the Lords Justices of Appeal in the last mentioned case are worthy of nate. James L. J. at takes page 23 said:

MAIN ARGUMENTS The first and main argument of the plaintiffs is that any election of Committee merler place in the year 1948 later than the "I cannot conceive that there is month of April is a direct contra-nny equity on the part of a share- vention of Article 32 of the Articles halder, on behalf of himself and the of Association and should therefore minority, to say, 'True it is that the

second groundwater be restrained. The

majority have a right to determine

relied upon, for the purposes

con-

we

dividual

The Chamber hand by passing the new Articles in March, 1918 placed itself in an anomalous position. By Article 11 the annual general meet-left, whi ing is directed to be held at such time as the Chamber may direct in the preceding general meeting and In default during the month of July. Article 11 also contains the following provision:-

take

COMMITTEE ELECTION

is

think

to

the

nov

On the first ground Counsel for have sanctioned certain proce/Reners meeting. Therefore the 1948) were to be challenged na the annual

to tre

to the outbreak of the Pacific War principle. The rat was Automatic another removed, and

to

ought or ought not/August) and at it, the committee scope of the rule in Foss v. Har-

appointed.

WEIGHTY_ARGUMENT_

INCIDENTAL DISTINCTION While that distinction is a good one as far as the present ease goes, it is, I think, only incidental and is not the basis of the distinction be- tween the Foss v. Harbottle Hne of com-cases and Automatic Self-cleansing

line, which

"For practical purposes there is I have indicated rests ns

no board of directors at all. upon the fact that the will of the majority could in the former cases, only directors are two persons, one the whom refuses to act with Court though irregularly expressed, be

pany confirmed if necessary, and in the other, and the question is, what is company tor

be done under these circum latter could not, because it had gone

stances? On this point I think that beyond the contractual powers of the

Horbottle 1- I can usefully refer to the judgment majority. In Foss v. self. the

alleged

of the Court of Appeal in Isle of kenage

wa material. I think that it might be Wight Ry. Co. v. Tahourdin not for mate proper to

to hold in the present case.

the sake of the decision. which exemplified by the Automatic Self- case under the Companies Clauses eleansing case,

but

for the ca

that as the powers Consolidation Act, 1945, given by the Articles were not in

sake of the observations of Cotton fael exceeded, their exercise at the and Fry L. JJ. upon the effect of wrong time was a mere irregularity deadlock such as arose in the pre-

Cotton L. J. says which, even though it could not be sent case.

it is said that there is no power in person The judgment read:

cured, did no doinage to any and that therefore the "majority

the meeting of shareholders The writ in this action which was

elect new directors, for that wider brought by seven members of the

} think it better, however, to ap- the 89th section the power would Chinese Chunber

Commerce

proach the matter from a different in the remaining directors. The (hereinafter called "The Chamber")

angle though the underlying prin- remaining directors would no doubt seeks a declaration that the Chamber

inciple involved is the same,

have that power if there was is not entitled to proceed to the

quorum left. But suppose election of the Committee and Super-

meeting were to remove so many vising Committee during

the year

directors that a

a quorum was not 1948, and an

an Injunction to

restrain

what then follows? It has the Chamber from proceeding with

been argued that in that case, there such elections. The proceeding

being no board which could act. actually

the Court was un

there would be no power of filing inter partes summons, the hearing

up the board so ng to enable it to of which was by consent treated as

work. In my opinion that is utter- the trial of the action, asking for

wo y wrong. A power is given by the an interlocutory injunction (a) to

89th section to the remaining "In any year in which the term restrain the defendants from electing

shall directors if they think proper so members of the Committee and

to do to elect persons to all up the ber in contravention of the provi- | necessary amendment to the writ, is management of a coinpany, but then expire, the election of the committee vacancies. I do not see how it is Supervising Committee of the Cham- which leave was given to make the everything in connection with the of office of the committee

every have a right-and

In- shall

place at the annual of the Executive |

non-existent body to possible for luve has a right—to

a meeting in pursuance of titis that the refusal

[]} proper Committee to

vacancies Committee and

up until meeting held in strict form in ac-Article.”

In such case a general meeting sider the new applications

cordan

ecwith the Articles" "; the general after

'meeting und

summoned for the purpose and later at the same page:

duly Article 6 of

The whole question comes back

must have, power to elect a new By Article 10 that election election contravenes the Articles of Association and that as a result the Chamber should be to a question of internal manage deemed part of the ordinary business board so as not to let the business

of the company

be at a deadlockc is to say, whether the of the meeting. It is agreed that ment; that n company ex

I should perhaps add, though the limited by guarantee and by virtue restrained from hulding the meeling meeting ought or ought not to be no date for the 1948 annual general

or clection until the applications

point was not taken, that the the of its objects holding the Governor's

whether meeting was fixed by preceding have been considered., 1 will deal held in a particular way,

meeting of the Chamber in May the licence to dispense with the word

with these submissions in order. directors ought or ought not to

general "Limited" in its name. From al

meeting must, be held

general meeting us being held on davits on the file, it appears that

about ta

July for by the application of cer- the wrong date that is a matter taln certain changes in the Articles of the plaintiffs relled principally on which they are

provisions, In subsidiary two cases as being illustrative of a whether one director ought or

which definitely comes within the Association had been mooted prior line of cases governed by the same not

elections must take place. But ac- botile. Co to have been Self-cleansing Filter Syndicate

If there is cording to Article 32 the and In 1947 what are sidered id. . Cuninghame 1900 2 Ch. D. some, one "managing the affairs

clection ns new Articles were

of must be held before the end of sub-committee and were ap- 134. The facts there were that the company who

A result similar to the view I not lo

lo Aprli.

being: In That

circum- circum- proved at a

eneral

meeting of company in general meeting, passed manage them, and if they are being stances

holding members on September 8,

the Article 32 was It 1947.

Article the result is, if both by

directory only and thereby recon- was proposed to adopt the

requiring the directors to carry into ought not to be managed, the com- Article new

are to be

ne construed Articles at another general meeting effect a sale of the company's assets, pany are the proper persons to com- mandatory, that the

ciling it with Article 11. Chamber is left think I

I do not need of plain of that."

Into this aspect of October 10, 1047, but that meet- The directors refused, being

without any machinery whereby a

matter INTERESTING QUESTION

beyond ins was adjourned until October 17 opinion that the sale was not for the

observing committee can be elected during the the de lieneft when on legal advice it was

of of the company. By the

counsel argument The last sentence is interesting, 1048, unless the Articles are again that sided

bo for the Chamber appears to have Articles, to conveno

the management ordinary General Mecting to con

Company's affairs was vested in the as the short question in the present alred. If a committee cannot be considerable weight in the light of the Committee elected in 1948, it appears that the the decision quoted by him. v. sider and pass

the Articles which directors "subject to such regulations action is whether were in the meantime, to be further

ns may from time to time be made which will presumably by now have Chamber will be left without a comNorwich Corporation B. & A. 310

The general statement, in considered. In view of the proposal

by extraordinary resolution." It was been appointed by the Chamber will mittee.

and in view of the, at least, partial 513 that the acting not; Hailsham to adopt the new Articles on Oc

held that the resolution being one be one validly appointed tober 10, it was resolved by the of a simple majority, the directors if not, it would appear to be the view directors of a company are in like repugnancy which would result from

to a mandatory construction.

Looked con- circumstances usually qualified L. J. that only the James L.

at from That the rule act, is

rule act, is qualified by the reterence

a contractuni Committee that no new applications were not bound to comply with it

point of complain. for

Cozens-Hardy LJ, said at p.44 ofpany can received

which is of course properly after the report"

Unis at Hurbottlo It seems to me that in Foss v.

thereal to at the end

true View, was the shareholders have by their ex-effect is also the opinion expressed cunstrit, for the general statement the correct one. the position is

Articles, and the urged by Counsel on both sides as of Palmer's Company press contract mutually stipulated, in

Edition) that their common affairs should be (10th

al

have its base in such provi- better so far as the plaintiffs are must

A and concerned. The Articles beh managed by certain directors to be "But the company may bring an sions as Articles 76 of Table

les binding upon of the Companies o

the Chamber as 38 of Tuble 30 appointed by the shareholders in the action to restrain a de facto rectoriance, 1932. Those Articles are contract under sesil, the Chamber manner described by other Articles, from arting as director or repre-

a convenanting such

directors being liable

Construed as a

a whole, the special senting himself as such. This right, not applicable to the Chamber, the is being sued be removed only by

a party. Articles of which provide for

that of office. effect of the Articles is there were resolution. If you once get a stipu- however, is confined to the compuny

Individual att

member has no right definite two-year term

13 a lation of that kind made between the

a positive covenant to take the where such parties, what right is there to inter-to bring such an action where a In

director

before * disqualified or improperly existing appointments have expired necessary steps for election

negative appointed. For the maller is one and there has been no fresh an- the end of April-not

Courts have not one to do nothing thereafter. for the

to determine, that pointment, company to is, for

for the

and if the hesitated to declare that no directors the Chamber commits a breach of mujority,

that covenant is to be debarred majority choose not to interfere, the existed. and further that n of the The second case Salmon v. Quin individual member must conform to Thus in Tyne Mutual Steamship from remedying that breach us woon Committee members of the Cham & Antons Ltd., 1908 I Ch. 911 is one the will of the majority. See rule Insurance Association V. Brown 74 repos much ber were under his influence and in which the same priaclple was in Foss v. Harbottic P. 230,

L.T.R. (N.S.) 203 where the Arti- remedy such as injunction be made his Instruments in directing adhered to; the management of the

that directors heid *** Nevertheless, there are cases, eg eles provided WEL

tor from remedying Homage, nt the policies of the Chamber. This company was vested in the directors forfeitures of shares or calls made office for one year, it was held that which has last allegation is hotly denied in nn with the previse that no resolution by directors improperly appointed,

minority of the affirmation

atton signed by all members of the directors on a certain sub-

election, and were not cured by a more readily be granted to enforce and one member who managing directors dissented from To revert to MacDougall v. Car- Article designed to cure defects in the election as in the Norwich Cor- Is one of tho plaintiffs)

of it. A certain resolution of the and It is it.

of the diner, Mellish L. J. at p. 25 of the

and qualification appointment to be noted that

directors having been so dissented

sented report says:

directors. A similar decision was Poration case. mission of the new members. Howe | resolution by a simple majority in plained of is a thing which in sub-Morria v. Karssen 1945, 1 A.E.R. 580. It remains to consider the second tion has taken place since the ad- from the company passed the same my opinion, if the thing com- delivered by the House of Lords in

SECOND SUBMISSION meeting. It was held that stance the majority of the company In the result, the Chamber will have appear later in this judgment, I the company should be restrained are entitled to do, or if something no committee as from some date tubmission on behalf of the plain- consider theso matters to be from

acting upon the resolution has been done Irregularly which the this year, and if overy Article is uns-that the Executive Committee relevant only as showing the back-which was

inconsistent with the majority of the compony are en- to be construed strictly, it will not and the Committee were not en-

able to elect

titled to defer consideration of the one until the ground of the dispute.

Articles. In the present case, the titled to do regularly, or if some be

new applications of March, 1948 The new Articles

On this finally relevant paragraphs of the Article thing has been done illegally which Articles are amended--for Article 11 were

company are provides for election only in any until after the election. approved and adopted at an Extra- governing elections by members of the majority of the ordinary General Meeting held on the Chamber are as follows:- entitled to do legally, there can be year in which the term of office of submission, the Court having in- dicated that in view of the meagre March 5, 1940. During that month, 32. (a) The election of members no use in having a litigation about a committee shall expire.

material on the point contained In according to the affidavits filed on of the Committee and the Supervi-11, the ultimate end of which is only CONSTITUTIONAL DEADLOCK the amdavits, and in the absence their behalf, the plaintiffs "Intro-sing Committee shall be carried out that a meeting has to be called, and

circumstances, In these

the of any application for cross-examina- Its duced a large number of their before the end of April in the year then ultimately the majority gets

Articles having resulted In ation of deponents, it was not dis- friends and

argument con- porod reputable merchants to in which their election is to take wishes. Is it not better that the rule

to consider any

the should be adhered to that if it in a constitutional deadlock never

two apply for membership of the Cham-place; The mode of election is as thing which the majority

framers of the based on mala fides by are the templated by the of (b)

Counsel is Committees concerned. ber" with the avowed object follows:-Twenty members shall be masters of, the majority in substance amended Articles, the company

would checking the growing power of Ko cheule-hung. A meeting of the clected at a general meeting to shall be entitled to have their will entitled to fall back upon the in- agreed that his argument

herent right to elect a committee rest on the mere fact of the refusal Executive Committee held on March supervise the election. These followed?"

committees to consider (which is in law in no way different of those

the TRIVIAL IRREGULARITY of Supervisors shall carry out all that

applications before 18 necessary in connection there.

In the present case the irregularity from the Board of Directors of a the new

trading company.) Worcester general merling-or at least to

that all

time the with and fix a date for the same."

those complained of is not that the elec- Corselry Lid, v.. Witting 1936 Ch. it was impossible to examine.

Therefore, It is argued that any tion was effected by a body incom- D..640. was a case in which the allowed. His submission was based large number of applications in time

0 Article

which rends to All vacancies in the on taking place aller and referred the matter to the Com-election

thepelent to do so but that it was car-power mittee for its decision. The Com- month of April la

follows:- breach of the ried out by that body at the wrong directorate had been vested by the

the directors and

"Any person, firm, hong, and should be restrained. time. This being so, it would appear Articles in mittes decided on March 25, that Articles the applications should be referred As for as the legal principles in that the irregularity was trivial and power was reserved to the company claton or organisation desiring to for consideration to the new com- volved are concerned, I think that did in fact no damago to the plain-io elect in general meeting. It was beconio a member of the Chamber

(Continued on Page 8) mitteo to be elected before the end the proceduro indicated by Article tiffs, who would have been in no held that the power of appointing

resolution by a simple majority manaked in a way in which they ces contrary to the sons or have expressed would be arrived t

on

another

Extrax

membership

on October 14

would This

resolution

3 p.m. considered,

a sub-committee

be

was

was

rescinded at the meeting of Octo- ber 17 and appointed either then or at some subsequent date to consider new applications. By February, 1948, the sub-committee had considered over 3,000 applications and 2,977 approved.

ALLEGATIONS

some 1.500

It is alleged by the plaintiffs that of these applications, were lodged by persons solicited by A member named Ko Cheuk-hung

were

of the

fere with the contract, apart, of course from any misconduct on the part of the direelorn."

SAME PRINCIPLE

of

has

page

179.

parn

clrcumstances,

the

the

go

Would

no

equitable

avaliable to restrain the covena→ breach.

where the appointment can undoubt acts after the expiration of that period the sult of s

in default of re- Invalid were two Executive Committee (except feet should be valid if elther of two sily be attacked by an individual.

of the

do

"comme

cleç-

ever, for consideration which will

in

10, 1848 decided that, View

the approach of the annual meeting,

ая

no

covenantecs?

consider

no

the

I think not; it would

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