CHINA GUANGZHOU INTERNATIONAL ECONOMIC & TECHNICAL COOPERATION CO LTD formerly known as CHINA GUANGZHOU INTERNATIONAL ECONOMIC & TECHNICAL COOPERATION CO v. OFFICIAL RECEIVER

HCCW 339/2008

[2019] HKCFI 152

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 339 OF 2008

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DECISION

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1.  This is an application by a PRC company (“the Applicant”), the majority shareholder of China Ample Development Ltd (in liquidation) (“the Company”) pursuant to section 209 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32 (“the Ordinance”) for an order to permanently stay the winding up of the Company.

2.  The Company was set up in 1987 in Hong Kong as a representative office of the Applicant which carried on business on overseas project contracts.  It was wound up by the court on 8 October 2008 after it failed to discharge a judgment debt obtained by the Bank of China (“BOC”) against it.  Ng Kwok Wai and Lui Chi Kit were appointed its liquidators.

3.  The Applicant held 9,998 of the 10,000 issued shares of the Company.  The remaining two shares were held as to one each by Liu Jianping (“Mr Liu”) and Cheng Dongqi (“Mr Cheng”) the two directors of the Company.

4.  On 20 May 2010, the liquidators filed a report to the effect that the directors were uncontactable based on which an application was made for and an order obtained from the master on 27 May 2010 dispensing with the filing of the statement of affairs required under section 190 of the Ordinance.

5.  The Company apparently dormant since 2003 was unaware of the petition and the winding up order until July 2010 when it received a letter from the liquidators.  The liquidators were released on 11 February 2011.

6.  In 2015, the Applicant applied for an order under section 290(1) of the Ordinance to declare the dissolution void and to restore the Company to the register.  It transpired that the Company had a civil claim against a third party. Negotiations between the parties culminated in a settlement under which the Company would receive RMB 4 million.

7.  G Lam J made the order sought on 7 May 2015 because it would enable the creditors to be paid.  The liquidators were re-appointed.

8.  Nevertheless, it is apparent from his Decision that the Judge was highly critical of the directors in failing to file in the statement of affairs.  He considered the directors’ plea of ignorance of events affecting the Company ‘unacceptable’ and was critical of the fact that persons other than the liquidators took steps to recover sums due to the Company when, after the winding up, such steps should have been conducted solely by the liquidators.

9.  Consent letters for the present application from the Applicant and Mr Liu being members of the Company have been filed.  The present application is supported by the liquidators who have filed an affirmation deposing to the fact that the known debts of the Company, the debts and expenses of the liquidators and the petitioner’s costs have all been settled.

10.  The Official Receiver has no objection to the application save for the outstanding issue relating to the need for the former director of the Company to file a statement of affairs.

11.  In her letter dated 6 December 2018, the Official Receiver drew attention to the fact that Mr Liu was a former director of the Companyand at the same time was and is also the legal representative of the Applicant:see §§6 – 7 of the affirmation of Shen Hao.  Indeed, Mr Liu’s written consent to the application dated 26 July 2018 is exhibited.  

12.  That notwithstanding, the liquidators’ solicitors Johnnie Yam, Jackie Lee & Co (“JYJL”) replied to the Official Receiver by letter dated 11 December 2018 stating in §2 that “… neither the Liquidators nor the Applicant are able to locate ex-director of the Company.”  

13.  Given the incontrovertible facts set out in §§9 and 11 above, there would not appear to be any rational basis for that assertion. Nevertheless, JYJL reiterated the liquidators’ inability to locate the ex‑director in §4 of its letter, relying on the 2010 order dispensing with the filing of a statement of affairs and citing a passage from §6 of the judgment of G Lam J in Leung Kai Hung v Choi Tze Kit Sammy [2018] HKCFI 1532 in support of the proposition that the real questions are whether there are matters that should still be investigated and whether all information that can reasonably take is now available.

14.  The written submissions of counsel for the Applicant and the liquidators also maintained that the former director was not contactable.

15.  The arguments made in the 11 December letter are misconceived for two reasons.  First, even taking the liquidators’ report before the master in 2010 at face value, circumstances have changed.  Second, as to the authority relied on, it is distinguishable: in the Leung Kai Hung case, a statement of affairs was in fact filed prior to the hearing at which the order was made.

16.  In my view, in the present case, there is no valid excuse for officeholders and their legal representatives to make errors of that kind.  Officeholders and their legal representatives have professional duties to discharge which must be taken seriously.

17.  A statement of affairs has now been filed.  It was received by the court the afternoon prior to this hearing.  But for that fact, the court would have required such a statement of affairs to be filed since it is the directors rather than the liquidators who have first-hand knowledge of the state of affairs of a company.

18.  I echo the sentiments of G Lam J in his Decision of 7 May 2015 effect that the filing of a statement of affairs is not a mere formality.  It is a statutory requirement that requires compliance given that the ex-director is now contactable.

19.  There will be an order in terms subject to the payment of the costs of the Official Receiver in the sum of $26,100 by the Applicant.