WELLABLE INVESTMENTS LTD v. LI WAI CHIU JOSEPH

HCMP 510/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 510 of 2016

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J U D G M E N T

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1.  By an originating summons dated 4 March 2016, the plaintiff (“the company”) sought the following orders:

(1)  that the notice of change of company secretary and director filed with the Companies Registry on 23 February 2015 be declared null and void and be removed from the Companies Registry;

(2)  that the notice of change of registered office of the company filed with the Companies Registry on 23 February 2015 be declared null and void and be removed from the Companies Registry; and

(3)  that the Registrar of the Companies Registry do rectify the information in the Companies Register by removing the defendant as a director of the company and restoring the address of the registered office of the company to its former address.

The two documents in (1) and (2) shall be referred to as “the purported documents”.

Factual background

2.  The plaintiff is a corporate vehicle that holds landed properties in Hong Kong.  Before the purported documents were filed, Madam Liu Pui Suen (“Madam Liu”) was 98% shareholder and her two children Li Chi Chiu and Li Yuk Yin Fiona were each 1% shareholder of the Company.

3.  The defendant (another child of Madam Liu) used to be a shareholder and director of the company, too. However, because he had incurred substantial debts to other persons, he had resigned from directorship of the company in November 2014.  Madam Liu also bought his shareholding at a consideration of $280,000.

4.  The defendant used to reside at a property at Shatin City One (“the property”) owned by Madam Liu.  On 21 April 2015, Madam Liu revoked the defendant’s license to stay at the property.  Upon conducting a land search of the property, she discovered the purported documents purporting to reappoint him as a director and to change the address of the registered office of the company.  She had not signed them nor authorized their filing.

5.  In or about April 2015, Madam Liu also came to know that the defendant had used a power of attorney to purportedly sell the property on her behalf as lawful attorney.  However, she had never granted any power of attorney to the defendant.

6.  As a result of the matters in paragraphs 4-5 above, Madam Liu made a report the police and instituted various proceedings against the defendant, including the present originating summons.  The company also published announcements in local newspapers that the defendant was, as of 5 November 2014, no longer an employee, director or shareholder of the company.

7.  The defendant has not filed any acknowledgement of service.  He has applied for legal aid and the memorandum of notification of application for legal aid was only faxed in this morning.  At the hearing today, the defendant did not, in fact, contest the claim but was apparently concerned about criminal penalty and mitigation.  This court has explained to him that the present proceedings were civil in nature and criminal sanctions were for the criminal court.

8.  The Companies Registrar has been served with the originating summons but has not appeared or filed any statement pursuant to section 43 of the Companies Ordinance, Cap 622 (“the Ordinance”).

Legal principles

9.  Section 42 of the Ordinance provides that:

“(1) The Court may, on application by any person, by order direct the Registrar to rectify any information on the Companies Register or to remove any information from it if the Court is satisfied that –

(a) the information derives from anything that –

(i) is invalid or ineffective; or

(ii) has been done without the company’s authority; or

(b) the information –

(i) is factually inaccurate; or

(ii) derives from anything that is factually inaccurate or forged.

…

(4) The Court must not order the removal of any information from the Companies Register under subsection (1) unless it is satisfied that –

(a) even if a document showing the rectification in question is registered, the continuing presence of the information on the Companies Register will cause material damage to the company; and

(b) the company’s interest in removing the information outweighs the interest of other persons in the information continuing to appear on the Companies Register.

…”

Application of the legal principles

10.  The defendant admitted at the hearing that he had “done wrong” and signed the purported documents without the approval of Madam Liu.  He did not object to the orders sought against him.

11.  Accordingly, there was no doubt that the purported documents were filed without the company’s authority.  The information about the defendant’s reappointment as a director (three months after his resignation) and the change of the registered office of the company to the property address was factually incorrect.  Such information was derived from forms filed with the Companies Registry on which the signatures of Madam Liu were forged.

12.  Applying section 42(4)(a), the continuing presence of the information on the purported documents in the Companies Register will cause material damage to the company because:

(a) The defendant may use the purported documents to handle the company’s business or dispose of the properties held by the company.  The purported sale of the property by the defendant as attorney for Madam Liu was evidence of the defendant’s dishonest intention.

(b) Documents sent to the purported registered office of the company at the property address shall be deemed to have been received by the company.

(c) The company would be unable to file its annual returns for 2015 and onwards.  The Companies Registry has already returned the annual return of the company for the year 2015 to the company secretary and refused to register it.

13.  Applying section 42(4)(b), the company’s interest in removing the information greatly outweighs the interest of the defendant in the information continuing to appear on the Companies Register.  The defendant is no longer a shareholder or director and simply has no interest in the company.  He should not be permitted to hold himself out as a director of the company thereby misleading the public into thinking that the company shall be responsible for his acts done in the company’s name.

14.  Accordingly, the purported documents should be removed from the Companies Registry and the Companies Register should be rectified.

15.  The defendant’s application for legal aid was belated, being a month after the originating summons was first filed.  Since the defendant had no valid defence to the claim, there should not be a stay of the proceedings notwithstanding his application for legal aid.

16.  The defendant has applied for monthly instalments for payment of costs.  I reject his application as he had no financial documents in support.  Moreover, he earns about $14,000 per month.  He has to give $5,000 to his wife and he has debts of at least $3,000 to pay.  His offer to pay costs over a period of 12 months is not practicable.

Conclusion

17.  I order as follows:

(1) the legal aid stay is uplifted;

(2) I grant the orders sought in paragraph 1 above (which were those set out in paragraphs 1 – 4 of the originating summons);

(3) the defendant do pay costs to the plaintiff summarily assessed at $80,000; and

(4) the defendant’s application for payment by monthly instalments is dismissed, without prejudice to further negotiation between the plaintiff and defendant as to time(s) for payment.

18.  I thank counsel for his assistance.