Mighty China International Ltd v China Resources and Transportation Group Ltd [2025] HKCFI 4969; [2025] 6 HKC 1038 (Lydia Leung)
Lydia Leung represented the Plaintiff in Mighty China International Ltd v China Resources and Transportation Group Ltd [2025] 6 HKC 1038; [2025] HKCFI 4969.
The plaintiff company commenced proceedings in the Court of First Instance against the defendants. The 3rd and 4th defendants raised the preliminary issue of whether the proceedings were properly authorised by a written board resolution signed by CSY (a shareholder holding 50% of shares in the plaintiff) and his assistant, CLY, ostensibly as the majority of the plaintiff’s board of directors. Records at the Companies Registry suggested the following. After the 3rd defendant became the plaintiff’s sole shareholder (holding the sole issued share) and sole director, the plaintiff allotted one share to WSH, making him and the 3rd defendant hold one share each. WSH was also appointed as the 2nd director. Then, on the same day the 3rd defendant was allotted an additional 1,000 shares, WSH resigned as director. Subsequently, CLY was appointed as a 2nd director, and WSH had transferred his 1 share to the 3rd defendant, making the latter the sole shareholder again. The 3rd defendant transferred half of the shares to CSY, and CSY was appointed as an additional director. Lastly, CSY and CLY resigned as directors. The 3rd and 4th defendants contended that WSH never validly resigned as director, and CSY and CLY were never validly appointed. They also contended that even if CSY and CLY were validly appointed, CSY and CLY had resigned by way of a WhatsApp message. Therefore, the written board resolution was not validly passed. On the other hand, the plaintiff claimed that an oral agreement was reached between CSY and the 4th defendant’s husband, who was the true owner of the plaintiff, that the two of them would become equal partners holding equal shares in the plaintiff, and CSY would be appointed as a director once restructuring was completed.
Held, finding in favour of the plaintiff on the authority issue, that:
(1) The 3rd defendant, the 4th defendant and WSH were not credible witnesses. By the time of closing submissions, the relevant defendants had advanced three different versions in respect of WSH’s resignation and the appointment of CLY and CSY. The explanations proffered were not satisfactory. On the other hand, the evidence of CSY and CLY, being generally consistent with the contemporaneous documentary evidence, were generally reliable (paras 4.3-4.5).
(2) Whilst the agreement alleged by the plaintiff was oral, the chronology showed that it was in fact implemented. On the balance of probabilities, it was found that such agreement existed between the 4th defendant’s husband and CSY (para 6.7).
(3) It was found that the 3rd defendant had decided that WSH was no longer to hold office, in all likelihood by reason of the agreement. That was the decision communicated to the 4th defendant, who was left to liaise with the company secretary about documentation. Somehow, the decision was taken to use the resignation route. Therefore, notwithstanding that there was no written notice of resignation and the fact that the resolution to accept WSH’s resignation was no signed, the 4th defendant instructed the company secretary to present the relevant form. The reason why it was decided that WSH should no longer hold office was because, pursuant to the agreement, steps were to be taken to pursue the restructuring which would turn the plaintiff from a company simply holding the promissory notes issued by the 1st defendant to one with real activities. That was why the 3rd defendant signed the relevant resolution to as the plaintiff’s sole director. It was also found that it was the 3rd defendant’s intention, in all likelihood pursuant to the agreement, to appoint CLY and CSY as directors on the relevant dates (paras 7.9, 8.9, 9.5).
(4) It was the 3rd defendant’s own evidence that he was the sole beneficial owner of the plaintiff, and had the final say on the removal and appointment of directors. It had not been suggested that WSH took part in any decision-making in matters concerning the removal and appointment of directors. In light of the above findings, WSH had vacated his office as director of the plaintiff. It was the 3rd defendant’s intention that WSH should no longer hold office, and it did not matter to him the mechanism by which that result was to be achieved. Despite the lack of a written notice of resignation, the 3rd defendant had clearly given his approval to WSH vacating office, in all likelihood as a result of the agreement, by signing the relevant resolution, as contemporaneously discussed between the 4th defendant’s husband and CSY. As regards the appointment of CLY, although at the relevant time both the 3rd defendant and WSH were shareholders, as it was the 3rd defendant who was taking all the relevant decisions, CLY was validly appointed notwithstanding that there was no resolution for her appointment. A similar analysis applied to the appointment of CSY. Ciban Management Corp v Citco (BVI) Ltd [2020] UKPC 21, [2021] AC 122, [2021] 1 All ER 983 applied (paras 10.8-10.11).
(5) In the proper interpretation of the WhatsApp message relied upon by the relevant defendants, CLY and CSY had not resigned and were not removed as directors (paras 11.4-11.5).
(6) The resolution to commence these proceedings was valid. At the time of its signing, the plaintiff’s board consisted of the 3rd defendant, CLY and CSY. CLY and CSY were the majority of the plaintiff’s board (para 12.1).
[The above is excerpted from the headnote to the report in HKC.]
