LAU YUN LIN v. KWAN TSEUNG CO LTD

HCMP 29/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 29 OF 2017

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R E A S O N S   F O R   D E C I S I O N

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1.  On 14 March 2017, after hearing counsel for the plaintiff, I dismissed the Originating Summons with no orders as to costs and indicated that I would hand down brief reasons in writing, which I now do.

2.  The plaintiff issued an Originating Summons in the general form (Form No 8) claiming the following relief:

(1) A declaration that there is an error in the plan annexed to the Assignment of the All That Shop Space on South Side on the Ground Floor of Man Cheong Building, No 5 Tsing To Path, Tuen Mun, New Territories (the “Property”) dated 28 August 2012 executed by the plaintiff as purchaser and the defendant as vendor and registered in the Land Registry by Memorial No 12090600520018 (the “Assignment”);

(2) An order pursuant to the covenants for title contained in the Assignment directing the defendant to execute a confirmatory assignment to rectify the error aforesaid or, in the event that the defendant cannot after reasonable inquiry be found, an order pursuant to section 25A of the High Court Ordinance (“HCO”) directing such person(s) as the court may nominate to execute the said confirmatory assignment.

3.  On the plaintiff’s evidence filed in support of the Originating Summons:

(1) The defendant was at the material time the owner of the parcel of land and building constructed thereon known as Man Cheong Building, No 5 Tsing To Path, Tuen Mun, New Territories, Hong Kong;

(2) From the Second Schedule to the Deed of Mutual Covenant (“DMC”) of the building, the building comprises of, inter alia, 11 floors and roof, and also a ground floor and watchman space.  Annexed to the DMC are plans including, inter alia, the ground floor plan of the building;

(3) The plaintiff is the registered owner of the Property, being the shop space on the south side of the ground floor of the building. The plaintiff acquired the Property from the defendant and the Assignment was executed on 28 August 2012 with plan annexed thereto;

(4) The plaintiff recently intended to sell the Property, and upon checking the title deeds and documents of the Property, it was found that there was a discrepancy between the ground floor plan annexed to the Assignment and that in the DMC;

(5) The plaintiff then conducted a physical inspection of the Property, and found that the Property and its partitioning corresponded to the DMC plan but not to the Assignment plan.  Specifically, an area that should form part of the Property according to the DMC plan was not so delineated in the Assignment plan.  There was therefore a mistake in the Assignment plan requiring rectification;

(6) At the time the Property was purchased on 28 August 2012, the defendant was already in voluntary liquidation, and the defendant’s liquidators were parties to the Assignment;

(7) The liquidators filed a return of final general meeting with the Companies Registry on 31 July 2013.  Two notifications of liquidator ceasing to act were also filed with the Companies Registry on 22 August 2013;

(8) Pursuant to section 239(4) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32), the defendant was dissolved on the expiration of three months after the filing of the return of the final general meeting.  Hence, the defendant was dissolved on 31 October 2013, and from then on, ceased to exist.

4.  As recognised by the plaintiff, the defendant had been dissolved for some three and a half years by the time of the commencement of these proceedings.  Although the Originating Summons is inter partes, as confirmed by the plaintiff’s counsel, Mr Yip, no steps were (or could be) taken to serve the defendant with these proceedings.

5.  The plaintiff, however, prays in aid of section 25A of the HCO to overcome the problem of the defendant’s dissolution. Section 25A provides that:

“ (1) Where the Court of First Instance has given or made a judgment or order directing a person to execute any conveyance, contract or other document, or to endorse any negotiable instrument, then, if that person -

(a) neglects or refuses to comply with the judgment or order; or

(b) cannot after reasonable inquiry be found, the Court of First Instance may, on such terms and conditions, if any, as may be just, order that the conveyance, contract or other document shall be executed, or that the negotiable instrument shall be endorsed, by such person as the Court may nominate for that purpose.

(2) A conveyance, contract, document or instrument executed or endorsed in accordance with subsection (1) shall have the same effect as if it had been executed or endorsed by the person originally directed to execute or endorse it.

(3) Nothing herein shall be held to abridge the powers of the Court of First Instance to proceed by attachment against any person neglecting or refusing to execute or endorse any such instrument.”

6.  The plaintiff contends that as the defendant no longer exists, it “cannot after reasonable inquiry be found” within the meaning of subsection (1)(b), and in such circumstances, the court can nominate a person to execute the confirmatory assignment which would have the same effect as if it were executed by the defendant.  In my view, this is misconceived.

7.  It is well established that a company that is dissolved ceases to exist as a legal entity and (absent any express statutory provision to the contrary) is not normally in a position either to sue or be sued or indeed to do any other legal act.  See eg Integrated Marketing Communications Limited and Another v Registrar of Companies [2015] 5 HKLRD 362 at §7.

8.  It follows that these proceedings have not been properly constituted, as the sole defendant is a non-existent entity and cannot be sued.  Even if these proceedings were allowed to proceed ex parte (they should not be), no order can be made against a non-existent entity requiring it to do any legal act.

9.  Section 25A does not assist the plaintiff in these circumstances.  First of all, it is clear from subsection (1) that the section is premised upon the court having given or made “a judgment or order directing a person to execute any conveyance, contract or other document, or to endorse any negotiable instrument…”  In my view, the references to person (whether natural or legal) in the section must be to a legally existent person.  As no judgment or an order can be made against such a person, the section is not applicable.  In short, there is nothing in section 25A to enable a departure from the general principle in paragraph 7 above.

10.  More fundamentally, as long as a company is and remains dissolved, its property is bona vacantia and belongs to the Government — section 752 of the Companies Ordinance (Cap 622) (“CO”).  The proper defendant to the present application should therefore have been the Government, being the current legal owner of any residual interest in the Property that may have been vested in the defendant prior to its dissolution.

11.  Mr Yip referred the court to a number of authorities to support his argument as to the applicability of section 25A to the present case.

12.  In Goldsteady Investment Ltd v Fatima Estates Ltd [2000] 1 HKC 819, Woo J granted relief under section 25A against the defendant to perfect the assignment of a property where the defendant was no longer at its registered office in Hong Kong and its directors could not be found.  There was nothing to suggest that the company in that case was dissolved or had even been wound up.  Section 25A was clearly applicable in the circumstances of that case but cannot assist the plaintiff here.

13.  In Li Kwan Chuen v Vector Development [2009] 3 HKLRD 511, Sakhrani J granted relief under section 25A again to execute a confirmatory assignment where the defendant, a company incorporated in the British Virgin Islands (“BVI”), had been struck off the register but not dissolved.  The defendant therefore was still in existence as a legal entity.  The originating summons was served at the defendant’s registered address in the BVI but there had been no response.  Again, the facts of that case are distinguishable from the present.

14.  The only authority directly on point is a decision of Deputy District Judge Ludwig Ng in Chu Po Chuen v Kwong Yip Company Limited & Anor (unreported) DCMP 1062/2015, 21 July 2015. The circumstances of that case are somewhat similar to the present — the plaintiff was the owner of a unit in a multi-storey building of which the 1^st defendant had been the developer.  The plaintiff discovered a mistake in the plan annexed to the assignment from the developer to the first purchaser and therefore sought, inter alia, an order that the 1^st defendant execute a confirmatory assignment.  The developer was dissolved in 1980, some 35 years before the proceedings were brought. The deputy judge granted the order sought under section 25A, ostensibly on the authority of Goldsteady and Li Kwan Chuen as well as a passage in sub-para (c) of paragraph [389], p 165, Part VI of Hong Kong Conveyancing Law and Practice, 2015, where the authors observed that:

“In a case where the party who is required to execute the confirmatory (remedial) assignment is no longer in existence or cannot be found, the court may, under section 25A of the High Court Ordinance, order the Registrar of the High Court to execute the relevant deed. Similarly, a judge of the District Court may order the Registrar of the District Court to execute the relevant document under section 38A of the District Court Ordinance”.

15.  Mr Yip referred the Court to the same passage in the 2017 edition of the work, where the authors cite Chu Po Chuen as support for the proposition.

16.  With respect, Chu Po Chuen is plainly inconsistent with the general principle set out in paragraph 7 above and section 752 of the CO.  It does not appear from the judgment that the deputy judge’s attention had been drawn to the distinction between the circumstances in Goldsteady and Li Kwan Chuen and those where a company has already been dissolved.  I therefore decline to follow Chu Po Chuen as authority that section 25A is applicable in the latter.

17.  Similarly, in my view, the passage in Hong Kong Conveyancing Law and Practice mentioned above is wrong and should not be followed.

18.  As I had indicated to Mr Yip at the hearing, a party in circumstances such as the present is not without remedy.  As mentioned above, the proper defendant to proceedings such as the present should be the Government.  In cases concerning bona vacantia the Registrar of Companies has been given authority to act on behalf of the Government.  See eg Yang Zhenghong v Registrar of Companies (unreported) HCMP 3115/2003 (23 November 2015) at §5.  Alternatively, an application may be made under section 765 of the CO for the restoration of a dissolved company to the Companies Register, with the effect that it is to be regarded as having continued in existence as if it had not been dissolved (section 768).  However, the present circumstances may not warrant the time and costs of such a course.

19.  In any event, the proceedings in their present form are improperly constituted.  Mr Yip invited the Court to give leave to amend the Originating Summons to substitute the name of the defendant with the Companies Registrar.  As there was no proper application before me to do so, and given that the Originating Summons has not been served, my view is that it would be preferable for the plaintiff to start afresh.  Indeed, Mr Yip was unable to point to any prejudice that the plaintiff would suffer if he were to commence fresh proceedings.

20.  In the circumstances, I dismissed the originating summons with no orders as to costs.