CHAN SHU NAM v. THE REGISTRAR OF COMPANIES

HCMP 2801/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2801 OF 2005

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J U D G M E N T

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1.  This is a re-amended notice of originating motion issued by Chan Shu Nam, seeking an order that the dissolution of Jetfly Industrial Limited (“the Company”) be declared void.  The originating motion was issued on 28 December 2005.

2.  The application is made under section 290 of the Companies Ordinance, Cap. 32.

3.  Mr Chan is the beneficial owner of all the shares of the Company.  Each of the two shareholders of the Company has executed a declaration of trust that he holds his shares upon trust for Mr Chan.

4.  On 23 February 2000, all the directors of the Company made a declaration of solvency in accordance with section 233 stating that the directors formed the opinion that the Company would be able to pay its debts in full within a period not exceeding 12 months from the commencement of the liquidation.  At the extraordinary general meeting on 25 February 2000, the members of the Company resolved to put the Company into members’ voluntary liquidation and to appoint liquidators.

5.  Pursuant to section 239, the final meeting of the members of the Company was held on 1 September 2000.  According to the return of the final meeting and the liquidators’ statement of accounts, the net asset of the Company as at the commencement of liquidation was $10,000.00.  The surplus of proceeds after realisation was paid to the shareholders.  The Company was dissolved 3 months from the date of registration of the return of the final meeting, namely, on 11 December 2000.

6.  This application to reinstate the Company is made outside the period of 2 years from the date of dissolution as provided in section 290(1).  Under section 290(1A), the court has power to extend the time limit within which this kind of application can be made, provided it is satisfied there are exceptional circumstances justifying the extension.

7.  According to the supplementary affirmation of Mr Chan, after the dissolution of the Company, it has been discovered an asset of the Company has been overlooked and not dealt with in the liquidation.  This is a property at Bayshore Towers, No. 608 Sai Sha Road, Shatin, New Territories.  This property was mortgaged to the Company by Cheung Tsz Chun for a loan of $3.4 million.  Mr Cheung took an assignment of the property on 31 July 1997 at a consideration of $3.4 million, and a mortgage of the property in favour of the Company to secure the loan of $3.4 million was executed on the same date and registered with the Land Registry.  Mr Cheung was made bankrupt on 30 April 2002.  He has not fully repaid his indebtedness to the Company and $2.7 million odd is outstanding.

8.  When it was decided to put the Company into voluntary liquidation at the end of 1999, Mr Chan had informed the accountants who were subsequently appointed liquidators of the existence of the loan and mortgage and had asked the accountants to transfer the loan to Jetfly International Limited (“Jetfly International”).  Jetfly International is also a company solely controlled by Mr Chan.  Mr Chan was not made aware that the mortgage has not been transferred with the loan.  When Mr Cheung was made bankrupt, Mr Chan was under the mistaken belief that the interest of the Company over the mortgaged property had been transferred to Jetfly International.

9.  In early 2004, after having received notice of adjudication of the proof of debt from the Official Receiver, Mr Chan instructed solicitors to accept the apportionment of secured and unsecured debt as proposed by the Official Receiver.  He was then still labouring under the misapprehension that Jetfly International had stepped into the shoes of the Company regarding the mortgage.

10.  In August 2004, Mr Chan instructed solicitors to handle the sale of the mortgaged property, having obtained the consent of the Official Receiver to his exercising the right to enforce the security by selling the mortgaged property.  It was then discovered that the rights and interests under the mortgage are still vested in the Company, not Jetfly International.

11.  Mr Chan’s solicitors then made enquiries with the liquidators of the Company.  Correspondence was exchanged in 2004 and 2005, the liquidators required time to retrieve their old files from a warehouse and to search for the papers.

12.  The delay in seeking an order for reinstatement of the Company was due to mistaken belief and ignorance on Mr Chan’s part.  I am satisfied no prejudice would be caused to any one by the present application.

13.  The Official Receiver as the trustee in bankruptcy has indicated he would have no objection to the Company exercising its right under the mortgage to enforce the security at the best obtainable price.

14.  The Registrar of Companies has indicated by letter he would not object to the application, provided that the order is to contain certain terms.

15.  Mr Chan also seeks an order, on the reinstatement of the Company, to appoint a certified public accountant to act as the liquidator.

16.  It seems to me appropriate to exercise my discretion to extend time for the application to be made and to grant relief sought in the re-amended notice of originating motion.

17.  I therefore make the following orders:

(1) an extension of time is granted under section 290(1A) to the applicant to apply for a declaration that the dissolution of the Company is void;

(2) the dissolution of the Company is declared void;

(3) Miss Li Yuen Yu Alice, a certified public accountant, is to be appointed liquidator of the Company upon its reinstatement;

(4) within 14 days hereof, a sealed copy of this order is to be delivered by the applicant to the Registrar of Companies for registration;

(5) upon delivery of this order to the Registrar of Companies, if the name of the Company is the same as or, in the opinion of the Registrar, too like a name appearing at that time in the index of company names maintained by the Registrar, the applicant shall arrange for the change of name of the Company within 30 days of the notice that may be issued by the Registrar directing the Company to change its name; and

(6) the applicant shall pay the costs of the Registrar of Companies in the agreed sum of $5,000.00 within 3 days from the date hereof.