NINA KUNG v. TAN MAN KOU AND OTHERS

NINA KUNG v. TAN MAN KOU AND OTHERS

Where equal shareholder deadlock prevents auditors being appointed at AGMs and there is ongoing litigation between shareholder camps that creates a legitimate requirement that auditors be objectively independent of both camps, the court will, under s.131(2), appoint auditors who are objectively independent. Applying that test, the court dismissed the applications to appoint WM Sum/WO Lo in HCMP 2108 and 2248 but granted the JA's application in HCMP 2162 to appoint Nelson Wheeler (1st–33rd respondents) and Moores Rowland (34th–39th respondents). Costs orders were made accordingly and the JA's own costs to be taxed on a trustee basis and paid from the estate.

Citation
NINA KUNG v. TAN MAN KOU AND OTHERS
Parties
Applicant / 40th Respondent (in HCMP 2162): Nina Kung alias Nina T H Wang; Joint Administrator / 1st Respondent (in HCMP 2108 & 2248) and Applicant (in HCMP 2162): Tan Man Kou; Joint Administrator / 1st Respondent (in HCMP 2108 & 2248) and Applicant (in HCMP 2162): Cheung Yat Ming; 2nd Applicant (in HCMP 2248) and 41st Respondent (in HCMP 2162): SiU Yat Nam Peter; 2nd Respondent (in HCMP 2108): Parasia Limited; 3rd Respondent (in HCMP 2108): Lewin Investments Limited; 4th Respondent (in HCMP 2108): Talbot Investments Limited; 1st Respondent (in HCMP 2162 and 3rd Respondent in HCMP 2248): C E Nominees Limited
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
17 June 2003
Case Number
HCMP2248/2003
Procedural Posture
Originating Summonses Under Companies Ordinance S.131(2) (appointment of Auditors) / Heard Together on Expedited Originating Summonses; Judgment Delivered
Outcome
HCMP 2108/2003 dismissed (application by Mrs Wang); HCMP 2162/2003 granted in part (Nelson Wheeler appointed auditors for respondents 1–33; Moores Rowland appointed auditors for respondents 34–39); HCMP 2248/2003 dismissed (application by Mrs Wang and Siu).
Legal Topics
Appointment of Auditors, Section 131(2) Companies Ordinance, Auditor Independence, Shareholder Deadlock, Costs and Trustee Taxation
Source Language
EN
Company Law Trusts and Estates Civil Procedure Appointment of Auditors Section 131(2) Companies Ordinance Auditor Independence Shareholder Deadlock Costs and Trustee Taxation

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Parties

Nina Kung alias Nina T H Wang

Applicant / 40th Respondent (in HCMP 2162)

Tan Man Kou

Joint Administrator / 1st Respondent (in HCMP 2108 & 2248) and Applicant (in HCMP 2162)

Cheung Yat Ming

Joint Administrator / 1st Respondent (in HCMP 2108 & 2248) and Applicant (in HCMP 2162)

SiU Yat Nam Peter

2nd Applicant (in HCMP 2248) and 41st Respondent (in HCMP 2162)

Parasia Limited

2nd Respondent (in HCMP 2108)

Lewin Investments Limited

3rd Respondent (in HCMP 2108)

Talbot Investments Limited

4th Respondent (in HCMP 2108)

C E Nominees Limited

1st Respondent (in HCMP 2162 and 3rd Respondent in HCMP 2248)

Procedural Posture

Originating Summonses Under Companies Ordinance S.131(2) (appointment of Auditors) / Heard Together on Expedited Originating Summonses; Judgment Delivered

Legal Issues

  1. 1 Whether the court should appoint auditors under s.131(2) where equal shareholder deadlock prevents appointment at AGM
  2. 2 Whether objective perception of auditor independence requires removal of existing auditors associated with one shareholder camp
  3. 3 Whether the interest of the individual company alone governs the court's exercise under s.131(2)

Ratio Decidendi

Where equal shareholder deadlock prevents auditors being appointed at AGMs and there is ongoing litigation between shareholder camps that creates a legitimate requirement that auditors be objectively independent of both camps, the court will, under s.131(2), appoint auditors who are objectively independent. Applying that test, the court dismissed the applications to appoint WM Sum/WO Lo in HCMP 2108 and 2248 but granted the JA's application in HCMP 2162 to appoint Nelson Wheeler (1st–33rd respondents) and Moores Rowland (34th–39th respondents). Costs orders were made accordingly and the JA's own costs to be taxed on a trustee basis and paid from the estate.

Court Disposition

HCMP 2108/2003 dismissed (application by Mrs Wang); HCMP 2162/2003 granted in part (Nelson Wheeler appointed auditors for respondents 1–33; Moores Rowland appointed auditors for respondents 34–39); HCMP 2248/2003 dismissed (application by Mrs Wang and Siu).

Orders

  • HCMP 2108/2003 dismissed with costs to the 1st respondents (Joint Administrators)
  • HCMP 2162/2003: Nelson Wheeler appointed auditors of the 1st to 33rd respondents from date of order to next AGM; Moores Rowland appointed auditors of the 34th to 39th respondents from date of order to next AGM; costs of the application to be paid by the 40th respondent