CHOI SIK TONG AND OTHERS v. CHEUNG OI WAH AND OTHERS

Civil Appeal
No.186 of 1984

Societies Ordinance, Cap.151 - sections 2(1), 2(2A) and 5 , and para . (6) of the Schedule

Upon the true construction of the Societies Ordinance, a Partnership formed for the purpose of applying for the franchise, and the operation of, two maxicab routes in the New Territories, and registered under the Business Registration Ordinance, does not require to be registered under the Societies Ordinance unless and until the Registrar gives the notice for which provision is made by section 2 2(A) of that Ordinance. Ng Pak Man & Others V. Fung Ming Kai & Others, Civil Appeal 69 of 1984 (unreported), distinguished.

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REASONS FOR JUDGMENT

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Cons, J.A.:

1. In the late summer of 1981 some of the Appellants, who are the Plaintiffs in the lower court, the 1st Defendant and the third party came together with a view to run a Maxicab Service in the New Territories. The Transport Department was then offering the franchise of what were to become New Territories routes 60 and 61. It would seem that each of the parties owned his or her own public light bus but none of them had resources sufficient to warrant an individual application.

2. The parties had in mind at first to apply for a franchise by way of a limited company and for this purpose they acquired the Shek Lei Public Light Bus United Trading & Co. Ltd. becoming the sole directors and shareholders. The name was later changed to the New City Maxicab Services Co. Ltd. but for convenience I shall refer to it simply as "the Company" throughout. It was however the policy of the Transport Department at that time to accept applications for such franchises only from individual persons. When this was realized the parties put in their application in the name of the 1st Defendant only.

3. The application was successful and practical operations commenced in March of 1982. The following month the third party withdrew from the association and the remaining Plaintiffs joined in. This group of 13 persons was subsequently declared in earlier and uncontested proceedings to be a partnership (H.C.A. 3289 of 1983) and may for convenience be referred to as "the partnership". Unfortunately disputes have arisen between the partners and the writ in the present proceedings was issued on the 23rd December 1983.

4. The partnership is not the only group running maxicab routes that has fallen into disunity. In Ng Pak Man & Others v. Fung Ming Kai & Others unreported Civil Appeal 69 of 1984 a similar association of 16 persons was considered by this Court. The Judge below had found that the group did not constitute a partnership in law. That was the first basis of the relief sought and the Judge's finding was not questioned in the subsequent appeal. However he had also taken the point that the group constituted a society within the meaning of the Societies Ordinance Cap. 151 and the group's not being registered thereunder it was ipso facto unlawful and the Plaintiffs were unable to obtain the alternative relief which they had sought as cestuis que trust. This Court upheld his conclusion.

5. With this in mind, and the partnership's at one stage being likewise unregistered, when the present action was called on before Deputy Judge O'Dea he was asked by Counsel for both sides "to hear as a preliminary issue the question of illegality". The precise question was not then reduced to writing but in his subsequent judgment the Judge referred to it as "whether the partnership declared by this Court to be in existence was an unlawful society".

6. For this purpose the facts as earlier set out were agreed. Others were in dispute and the Judge was asked to take the course, unusual in the circumstances, of deciding them upon evidence. The area of dispute that is material to this appeal was the extent to which the Company was involved by way of management. The Defendants contended that its activities were limited to the financial affairs of the partnership. The Plaintiffs contended for a much wider ambit. The Judge expressed his conclusion in these words:

"I have clearly found that the management of the two maxicab routes was entrusted to the limited company by the partners .........."

7. One ground of appeal is that the Judge's finding was against the weight of evidence. I may say at once that in my view that ground fails. Upon such evidence as was adduced, the Defendants calling none, the finding is well justified.

8. Section 5 of the Societies Ordinance requires every local society, which includes a partnership, whatever its nature or objects, to apply for registration or exemption under the Ordinance. If it fails to do so within 14 days of its establishment the society is deemed, by Section 18, to be unlawful. However not all societies are caught by the requirements of the Ordinance. Those which escape may be discovered by reference to the Schedule, which at the moment lists, in 14 paragraphs, the persons to which the provisions of the Ordinance do not apply. The question principally before the trial judge was whether the partnership was excluded from the Ordinance by the terms of paragraph 13:

"Any association of which -

(a) one or more of the directors, trustees or other holders; or

(b) the committee or board or other body having the management of the association,

is or are incorporated by any Ordinance."

9. The Judge found that it was so excluded. He said -

" I am of the view that clause 13 of the Schedule is sufficiently wide to embrace the partnership formed by the parties to this action. I rejected a submission put forward by Counsel for the Defendants that the 'ejusdem generis' rule applied to limit the meaning of the words 'or other body' to that suggested by its predecessors 'committee or board' as being too restrictive and ruled that the legislature was intending to ensure that an association would be exempt if its activities were managed by a body which was incorporated and thereby regulated by another Ordinance. A limited company would, in my view, fall within that scope.

    Having found, for the reasons given that the Ordinance did not apply to the partnership it was not necessary to consider whether other exemption clauses applied although I heard arguments to that effect. For the record I did not consider any other clause in the schedule could have been successfully invoked by the Plaintiff to gain exemption."

10. With every respect to the learned Judge in my opinion paragraph 13 is of no assistance to the Plaintiffs. The Companies Ordinance Cap. 32 does not operate to incorporate limited companies in itself. It merely provides a system whereby any two or more persons may, with the assistance of the Registrar of Companies, themselves incorporate a limited company. That company is then incorporated under the Ordinance - the words used in Section 17 - rather than incorporated by it. That was the approach taken long ago with regard to similar words by Kekewich J. in the Myrtle Case In re Smith Davidson v. Myrtle [1896] 2 Ch. 590 and I would respectfully follow.

11. I think I would also have difficulty in accepting the contention that the words of sub-paragraph (b) were apt to embrace the peculiar situation where the corporation has precisely the same membership as the association of which it is said to have the management. On the other hand I would reject the submission that the words "any association" at the beginning of the paragraph do not include a partnership, a submission based on the express inclusion of the word "partnership" together with "assocation" in one of the other paragraphs.

12. By a Respondent's notice the Plaintiffs seek to rely in the alternative upon paragraph 6 of the Schedule –

"Any company, association or partnership, consisting of not more than 20 persons, formed for the sole purpose of carrying on any lawful business and registered under any other Ordinance."

13. This is prayed in aid on the ground that on the 15th August 1983 the partnership, through the medium of the 1st Plaintiff, who expressed himself to be its Manager, applied for registration under the Business Registration Ordinance, Cap. 310. The application was at first refused, apparently on the ground that the 1st Plaintiff was unable to supply the Commissioner of Inland Revenue with photostatic copies of the 1st and 2nd Defendants' Identity Cards. Nevertheless the Commissioner did accept a subsequent "replacement" application in which those two were not included in the list of partners. In my opinion the omission of those two names does not affect the validity of the registration. The business of the partnership had been registered as required.

14. If paragraph 6 were read in isolation there would in my view be considerable, if not conclusive, force in the defence submission that paragraph 6 has no application in the instant circumstances, because what has been registered under the Ordinance is not the partnership, but merely the business of the partnership. The two are by no means the same. The partnership may for example have more than one business and each would need to be separately registered, although for convenience both might be included in the same application. This was the view to which I was tending when we adjourned to consider our decision. However, in the course of our deliberations we noted Section 2(2A) of the Ordinance which had not been mentioned in argument and is in these terms:

"    In the case of a society which is a person listed in the Schedule by reason only that it is registered under the Business Registration Ordinance this Ordinance shall apply if the Registrar gives notice to the society in writing stating that the society, in his opinion, is not or has ceased to be used solely for religious, charitable, social or recreational purposes, and the society shall be deemed to be established in the Colony on the date on which the notice is given."

15. Paragraph 6 is the only paragraph in the Schedule to which the subsection can possibly apply. Taking the Ordinance then as a whole it seemed to indicate a clear intention by the legislature that any commercial firm registered under the Business Registration Ordinance was to be excluded from the operation of the Societies Ordinance unless and until the Registrar saw fit to give the appropriate notice. Accordingly we invited Counsel to address us further if they so wished upon the effect of the subsection.

16. Mr. Bharwaney, who appeared at the earlier hearing with Mr. Eddis for the Plaintiffs, not unnaturally has approached the question along similar lines. On the other hand, Mr. Ismail, for the Defendants, has come back with, if I may say so, a rather involved submission which would, as I understand it, restrict the meaning of "society" in the opening phrase of the subsection to societies which are wholly religious, charitable or recreational in nature, and would also enable a court in the circumstance of litigation to substitute its own opinion of the nature of the society for that of the Registrar and somehow displace the need for his notice.

17. The need for this curious approach is to be found in reasons which I confess myself unable fully to comprehend but seem basically to rely on what is said to be the true intent meaning and the spirit of the subsection.

18. In my view the true meaning of the subsection can be found by reference to the original legislation as it was enacted in 1949. The associations to which it was not to apply were then not excluded by means of Section 2(2) and the Schedule but by reference to the definition of "society", which expressly excluded inter alia "any company, association or partnership, consisting of not more than twenty persons, formed for the sole purpose of carrying on any lawful business". The words "and registered under any other Ordinance" were added in 1961 when the present format was introduced. I should imagine that the intention was to encourage compliance with the Business Registration Ordinance, Cap. 310 which had been introduced in 1952 (as the Business Regulation Ordinance). I cannot conceive that by such a slight variation it was intended to make a significant change in the law and one which would affect an untold number of small firms and businesses throughout Hong Kong. Subsection 2A makes it clear that it was not.

19. Mr. Ismail has earlier conceded that if the partnership does fall within paragraph 6 then it is lawful from the date of its registration by the Commissioner. When that exactly took place is not clear. Possibly it was not until the 16th September, but if necessary the precise date can be established in due course. Mr. Eddis contends that the registration should have retrospective effect to the formation of the partnership, that is April 1982. He relies on In re Thomas, Ex parte Poppleton (1883) 14 Q.B.D. 379 which respectfully I find to be of no assistance at all. Alternatively, or in addition, he refers to letters written by the solicitors for the 1st Defendant in September 1983 indicating a willingness to join in the application for registration on condition that the 1st Defendant, rather than the 1st Plaintiff, be specified as the Manager. For my part I am unable to appreciate the significance.

20. As a final fall back position Mr. Eddis suggests that the registration is effective as from the 24th June, that being the date of commencement given in the Certificate of Registration eventually issued by the Commissioner. He refers us to Section 6(5) of the Business Registration Ordinance which, as it stood in August and September 1983 provided inter alia that "a business registration certificate shall be valid for the period of 12 months from the date of commencement endorsed thereon .............." I do not think these words alter the position, although they might have provided a good defence had, for example, a charge been brought for failing to display a valid business registration certificate as at say some time in July. The date on the certificate was obviously taken from the information supplied by the 1st Plaintiff in his application, information which we know from the agreed facts was in this respect untrue. It cannot vary the actual date of registration. In my judgment the partnership became a lawful society as from that date. Until then it must be deemed to have been an unlawful society.

21. I may add that I am pleased to be able to arrive at this conclusion. I see no harm in requiring commercial associations to register under the Business Registration Ordinance before they may seek the assistance of the courts in the resolution of disputes amongst their members. Registration under that Ordinance is a duty that is well known throughout Hong Kong. It would though, I think, be an unsatisfactory situation if persons entering into and conducting perfectly lawful businesses to the benefit of society as a whole should find themselves so deprived by failure to register under an ordinance that must be unfamiliar to most of the community, including perhaps the legal profession or at least those who practise mostly in the commercial field and from whom parties like those here involved would be most likely to seek advice.

22. For these reasons I would dismiss the appeal.

Sir Alan Huggins, V.-P.:

23. The trial judge was invited to decide a preliminary point of law, but it does not appear from the papers before us that the point of law was reduced to writing. The judge understood the question to be "Whether the partnership declared by the court to be in existence was an unlawful society". This related to previous proceedings in the High Court between the Plaintiffs and the 1st Defendant in which, in default of Defence, a Master entered judgment for a declaration that the Plaintiffs and the 1st and 2nd Defendants were partners for the purpose of applying for the franchise of, and of operating, two maxicab routes in the New Territories. Unless set aside that judgment remains binding on the parties to it.

24. It was common ground that this partnership (I will call it "the Partnership") had not been registered under the Societies Ordinance and that, if it required registration, it was an illegal society under that Ordinance. Further, it was agreed that it did require registration unless excluded by virtue of the Schedule to the Ordinance. The Plaintiffs contended that the Partnership came within either para.(13)(b) or para.(6) of the Schedule.

25. In relation to para.(13)(b) several questions arose: (i) whether the Partnership was an "association" within the meaning of the paragraph; (ii) whether the corporation formed by the partners had the management of the Partnership; and (iii) whether the corporation was incorporated by any Ordinance.

26. It was to be noted that para.(6) refers expressly to "any company, association or partnership", whereas para.(13) relates only to "any association". It was argued by the Defendants that this distinction was intended to have some significance and that, although in normal parlance a partnership must be an association, the Legislature here used the word "association" in some limited sense. Although I appreciated the force of this normal canon of construction, I was not persuaded that such a limited meaning could have been intended.

27. Secondly it was said that the words "or other body" in subparagraph (b) of para.(13), should be read ejusdem generis with "the committee or board" and could not include the corporation. That argument ignored the definition of "or" in s.3 of the Interpretation and General Clauses Ordinance.

28. Thirdly the Defendants contended that the corporation did not have "the management of" the Partnership. It was common ground that it had the management of the traffic on routes 60 and 61 and the Plaintiffs said that that constituted the whole of the business for which the Partnership was formed and the whole of the business which the Partnership in fact carried on. If, therefore, no distinction was to be drawn between the management of the Partnership and the management of its business, the Partnership was excluded. The Defendants submitted that there was a distinction and that the paragraph applied only where some internal body had absolute control over the association. I thought the Plaintiffs were right: it must be a rare organization which delegates absolute, all-embracing power to a committee, board or other body.

29. Where the Plaintiffs are defeated is on the fourth argument, for the corporation here was not "incorporated by any Ordinance". It was registered under the Companies Ordinance but not incorporated by that Ordinance: the incorporation was effected by the agreement of those who signed the Memorandum of Association. The distinction was clearly drawn in In re Smith, Davidson v Myrtle [1896] 2 Ch. 590. That the Legislature intended to maintain the distinction in the Societies Ordinance was apparent from the fact that para.(1) of the Schedule referred to companies "registered under the Companies Ordinance".

30. Para.(6) caused me more difficulty. The Schedule listed various "Persons to which the Ordinance does not apply". Nevertheless the Plaintiffs' contention was that the Partnership was excluded because the business of the Partnership had been registered under the Business Registration Ordinance. The first question was whether the Partnership's business had been registered. Undoubtedly a business had been registered, but it was a question of fact whether it was the business of the Partnership. It was the Partnership's business which was originally sought to be registered, but the Registrar, for reasons which seemed to him sufficient, declined to accept the registration. On the face of it the business which was subsequently registered by the 1st Plaintiff was another business, carried on by the Plaintiffs independently from the business they ran with the first two Defendants. However, it was then conceded that there was no separate business carried on by the Plaintiffs and that what was registered was the business of the Partnership. It mattered not that the 1st Plaintiff may have been liable to penalties for omitting the names of the first two Defendants from his application form - thus giving false information to the Registrar.

31. Was it sufficient to register the business and not the Partnership itself? As I have already said in relation to para.(13) of the Schedule, a partnership - which by definition is "the relation which subsists between persons carrying on a business in common with a view to profit" - could not exist apart from the business which it carried on. Nevertheless, when the Legislature speaks of a "person" it must normally be taken to intend to refer to a person and not to a business. It was true that the Business Registration Ordinance required the names of partners to be reported, but that did not alter the fact that what became "registered" was the business. But for s.2(2A) of the Societies Ordinance I might have felt compelled to hold that the Partnership was not "registered under any Ordinance" and was therefore not excluded from those societies which required to be registered. However, that sub-section clearly showed that the Legislature intended that, when a business was registered under the Business Registration Ordinance, the person carrying on that business was to be regarded as having been registered.

32. Finally it was urged upon us by the appellant Defendants that, even though "registered", the Partnership was not a partnership which came within para.(6), because it was not an association which was "used for wholly religious, charitable, social or recreational purposes". This contention was based upon s.2(2A), where those words appeared. However, there was no evidence that the Registrar of Societies had given notice under that sub-section, and it did not assist the Plaintiffs. On the contrary, it showed clearly both that the Legislature regarded an association of which the business was registered under the Business Registration Ordinance as itself registered under that Ordinance and also that, in the absence of a notice under the sub-section, the Ordinance should not apply to such an association. Reading the statute as a whole, we were bound to hold that this Partnership was not required to be registered under the Societies Ordinance and was not an illegal society. In NG Pak-man v FUNG Ming-kai Civil App.1984 No.69 the partnership was not registered under the Business Registration Ordinance or the Societies Ordinance and it was for that reason that the partnership was an illegal society within the meaning of the Societies Ordinance.

33. I also thought that the Partnership here became lawful at the latest upon registration of its business on 16th September 1983. (There was no need to consider whether the registration took effect retrospectively). I therefore agreed with the judge, although for different reasons, that at the date of the writ the association was lawful.

Fuad, J.A.:

34. I agreed with my Lords that the "partnership" was not an illegal society, with the result that the appeal should be dismissed.

15th February 1985