HO TAI KWAN v. GLOBAL INNOVATIVE SYSTEMS INC

                 HCA12/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 12 OF 2007

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JUDGMENT

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1. The writ of summons in this action with a statement of claim was issued on 3 January 2007.  It was served on the defendant at an address in Hong Kong namely, at 16^th Floor, Heng Seng Mongkok Building, 677, Nathan Road, Mongkok, Kowloon (“the Mongkok address”). 

2. By a summons dated 30 January 2007 the defendant applied for an order setting aside the writ or service of the writ on the defendant or for a declaration that the writ has not been duly served on the defendant.  The defendant’s application was determined by Master de Souza on 2May 2007 when the master ordered that the defendant’s application by summons be dismissed with costs.  This is the defendant’s appeal against the decision of the master.

3. The plaintiff’s claim against the defendant in this action is for the amount of two dishonoured cheques drawn by the defendant which were dishonoured on presentation for payment.  The plaintiff also claims in the alternative for repayment of outstanding loans. 

4. The defendant is a company incorporated in Nevada in the USA.  As pleaded in the statement of claim, on or about 5 January 2005 at the request of Mr Bondy Tan, the president and CEO of the defendant, the plaintiff agreed and advanced to the defendant a loan of HK$500,000 which was repayable on demand (“the 1^st loan”).  The purpose of the loan was to enable the defendant to set up a branch office in Singapore. 

5. On 25 January 2006 Mr. Bondy Tan asked the plaintiff for another loan in the sum of HK$2,000,000 (“the 2^nd loan”).  The purpose of this loan was to finance the acquisition of a lighting manufacturing business in Beijing.

6. As is pleaded in the statement of claim, on condition that the defendant secures the repayment of the 1^st and 2^nd loans by two post-dated cheques the plaintiff agreed to advance the 2^nd loan to the defendant by issuing two cheques to the defendant. 

7. On or about 25 January 2006 the defendant handed over two post-dated cheques drawn in the favour of the plaintiff in purported repayment of the 1^st and 2^nd loans.  Both cheques were post-dated to 31 March 2006 and drawn on a bank account in Hong Kong with HSBC.  One cheque was for HK$2,000,000 and the other for HK$500,000.  Both cheques were dishonoured on presentation for payment. 

8. The plaintiff’s claim against the defendant is for the said sum of HK$2,500,000 on the claim on the dishonoured cheques, alternatively for repayment of the outstanding loans to the defendant. 

9. Section 332 of the Companies Ordinance, Cap. 32 provides that Part XI of the Companies Ordinance shall apply to all overseas companies.  This includes a company incorporated outside Hong Kong which, after the commencement of the Ordinance, establishes a place of business in Hong Kong. 

10. Section 341 of the Companies Ordinance defines place of business as including a share transfer or share registration office in any place used for the manufacture or warehousing of any goods, but “does not include a place not used by the company to transact any business which creates legal obligations”.

11. Section 338 of the Companies Ordinance permits service of documents on an overseas company by sub-section (2) by leaving it at or sending it by post to any place of business established by the company in Hong Kong. 

12. The question to consider is whether the Mongkok address is a place of business for the purposes of the service under the Companies Ordinance. 

13. In Elsinct (Asia-Pacific) Ltd. v. Commercial Bank of Korea Ltd. [1994] 3 HKC 365, it was held that a broad common sense approach should be adopted to the interpretation of “the place of business”.  The emphasis is on whether the activities carried out in Hong Kong created legal obligations in view of the primary and subsidiary objects of the company. 

14. The defendant is a company incorporated in Las Vegas, Nevada in the USA on 14 September 1995 with its registered address at 3155 East Patrick Lane, Suite 1, Las Vegas, Nevada, USA (“the registered address”).  The registered address is also the office of the defendant’s resident agent, Incorp Services, Inc. which has been appointed by the defendant under the laws of Nevada to accept service of all legal proceedings on behalf of the defendant. 

15. The defendant is an investment holding company with numerous subsidiaries and associates.  The defendant is a company listed in Nasdaq where its shares are traded.  The defendant advances the business interests of the group as a whole. 

16. According to the 1^st affirmation of Tan Seng Seng filed on behalf of the defendant, the defendant has only one place of business at the registered address and nowhere else.  Tan Seng Seng also says that all business activities of the defendant’s group are entirely conducted through its subsidiaries and associates which function as the operating arm of the defendant’s group.  He also asserts that the defendant has no business activities in Hong Kong and maintains no place of business in Hong Kong.  He relies on the fact that the defendant does not have any business registration.  The defendant has no registration in the Companies Registry of Hong Kong and has not appointed any authorized representative in Hong Kong.  He also relies on the fact that the defendant does not employ any employees in Hong Kong and asserts that there is no person authorized by the defendant in Hong Kong to carry out any business for the defendant in Hong Kong.  The defendant has no income and expenses in Hong Kong and is also neither the tenant nor the occupier of the premises namely, the Mongkok address. 

17. Tan Seng Seng’s assertion that the defendant has only one place of business at the registered address in Nevada and nowhere else is, in my view, incredible in the light of the evidence before me. 

18. Form 8K dated 28 February 2006 signed by Mr Bondy Tan, the president and CEO of the defendant, shows clearly that this was a form filed with the United States Securities and Exchange Commission.  It gives the Mongkok address as “principal executive offices” of the defendant.  It does not even give the registered address in Nevada as an address of the defendant.  The “principal executive offices” must mean that these are the offices where executives are to be found and where executive decisions are made.  It seems to me that this constitutes a clear and unequivocal representation by the defendant to the United States Securities and Exchange Commission that the principal executive offices of the defendant is to be found at the Mongkok address.  The telephone number in Hong Kong is also given. 

19. I would observe that the plaintiff need only show that the defendant has a place of business in Hong Kong.  It does not have to go so far to show that it is in fact the principal executive office of the defendant in Hong Kong. 

20. Also in the evidence before me is a copy extract from the defendant’s own website.  There the defendant itself gives the Mongkok address as the corporate headquarters of the defendant together with telephone numbers, fax numbers and email address.  Apart from the corporate headquarters, addresses of Asian subsidiaries are given as well as representative offices of the defendant in Canada, Macau, Shanghai and Shenzhen are also given.  It is curious that the Nevada address is not mentioned at all.

21. It seems to me that by its own website the defendant has represented to the public that the corporate headquarters are at the Mongkok address.  The fact that the defendant was neither the tenant of the Mongkok address nor had signboards posted at the premises does not assist the defendant.  Quite clearly, the defendant was permitted to use and was using the Mongkok address as its corporate headquarters and its principal executive office. 

22. Another document that I was referred to in the evidence was the Term Sheet issued by the defendant for the subscription for convertible bond issued by the defendant.  In clause 1 of the Term Sheet it is clearly stated that the defendant had a place of business at the Mongkok address in Hong Kong.  The Term Sheet was signed by a representative of the defendant.  This again is a clear admission by the defendant that the Mongkok address was a place of business in Hong Kong. 

23. The evidence that I have referred to is overwhelming and I have no hesitation in saying that the assertion by Tan Seng Seng that the defendant has only one place of business at the registered address in Nevada and nowhere else is incredible.       

24. I would also observe that the plaintiff has said in evidence that Mr Bondy Tan, the CEO and president of the defendant, and most of the senior management staff are Hong Kong residents.  Mr Bondy Tan was at all material times operating in Hong Kong at the time when the two loans were granted and when the writ of the summons was served.  The monies were lent in Hong Kong and the two post-dated cheques were drawn on the defendant’s bank account in Hong Kong with HSBC and delivered to the plaintiff in Hong Kong. 

25. The plaintiff also gave evidence that he had been to the Mongkok address many times attending discussion, negotiation and transaction of business with the defendant.  The plaintiff has also produced name cards of Mr Bondy Tan, Victor Chang and Charles Cheung all officers of the defendant showing quite clearly the Mongkok address as the address of the defendant on the name cards.  

26. Mr Tan Seng Seng denies the assertions in Mr Ho’s affirmation but these are bald denials without condescending to particulars.  Although at this stage the defendant need not go into the merits of its defence, it is striking that nowhere in his affirmation in reply does Mr Tan Seng Seng condescend upon particulars as to where the defendant says that the transactions giving rise to the loans and the giving of the post-dated cheques to the plaintiff took place. 

27. I am satisfied on the evidence that the defendant has a place of business in Hong Kong within the meaning of the Companies Ordinance.  In my judgment the writ was validly served. 

28. The master was, in my view, correct in dismissing the defendant’s application.  The appeal is dismissed.