RE TAN & SONS CO. LTD. (in Provisional Liquidation)

HCCW 63/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 63 OF 1997

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D E C I S I O N

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1. This is an application taken out by an ex-parte summons by the provisional liquidators of Tan & Sons Company Limited (in provisional liquidation) ("the Company") under s 268(1) of the Companies Ordinance, Cap. 32 and r 63 of the Companies (Winding-up) Rules, seeking (1) an extension of time for making an application to disclaim certain onerous property; and (2) leave to disclaim the property known as the Roof Top of Portion B of the Main Roof of Serene Court, 41 Tin Hau Temple Road, Hong Kong ("the Property").

2. It is provided in s 268(1), inter alia, that where any part of the property of a company which is being wound up consists of land of any tenure burdened with onerous covenants, or of any other property that is unsaleable or not readily saleable by reason of its binding the possessor to the performance of any onerous act or to the payment of any sum of money, the liquidator notwithstanding that he has endeavoured to sell or has taken possession or exercised any act of ownership in relation thereto, may, with the leave of the court at any time within 12 months after commencement of the winding-up, or within 12 months after he has become aware of the property in the event he is not aware of it within one month after the commencement of the winding-up, or such extended period as may be allowed by the court, disclaim the property.

3. For the background of the petition for winding-up and the appointment of the provisional liquidators, I refer to the Decision of Yuen J (as she then was) on 25 September 2001, paragraphs 2 to 4.

The Property

4. The provisional liquidators first became aware that the Company is still the registered owner of the Property in February 2000, when they received a rates demand in respect of it. Thereafter attempts were made to sell the Property through an estate agent and by offering it to the Incorporated Owners Association of Serene Court ("the Incorporated Owners"), but these attempts were unsuccessful.

5. At the hearing before Yuen J on 25 September 2001, directions were sought by the provisional liquidators and leave was given to the provisional liquidators to sell the Property on whatever terms they could get, basically to rid the Company of what may in effect be a liability. As stated in paragraph 18 of her Decision, Yuen J had indicated to the provisional liquidators that if they were unable to sell the Property or even to transfer the Property at nominal value, they might have to come back to court for a disclaimer.

6. Further attempts were made to dispose of the Property after that hearing and they were unsuccessful. Even though the provisional liquidators were willing to assign the Property to the Incorporated Owners at no cost, the latter decided not to take up the offer. As a result, the provisional liquidators issued the present summons on 3 October 2002.

The hearing on 13 November 2002.

7. The summons first came before me on 13 November 2002. I adjourned the application to today and gave directions that the notice of the application be given by the provisional liquidators to all the registered owners of Serene Court and to the Incorporated Owners; that the provisional liquidators are to explain in writing to the registered owners and the Incorporated Owners the effect of the disclaimer of the Property, to invite them to attend the adjourned hearing, to submit their views in writing not less than 28 days before the adjourned hearing to the provisional liquidators who shall present them to the court in the event that the registered owners or the Incorporated Owners cannot attend the adjourned hearing, and to obtain copies of the summons and supporting evidence from the provisional liquidators on payment of reasonable photocopying charges.

8. These directions have been complied with. The provisional liquidators have also written to the solicitors for the petitioners and the representative of some of the contributories earlier, informing them of this application and inviting them to provide any comments they may have. The provisional liquidators have responded to enquiries raised by the solicitors for the petitioners and the representative of the contributories.

9. A number of enquiries were received from various registered owners, from a member of the board of the Incorporated Owners and a representative of the management office. Most of the enquiries simply sought clarification as to the nature of the application. One registered owner indicated that he might be interested in acquiring the Property but did not in the end make any offer. No response was received from the Incorporated Owners or the management office that either would be willing to take up a transfer. No request was received from any one to submit views or comments to the court at the adjourned hearing. No interested party has appeared at the hearing today.

The extension of time sought

10. For the provisional liquidators, Mr Barma, SC submitted that after the provisional liquidators had become aware of the Property in February 2000, it was reasonable for them to attempt to sell the Property and later to dispose of it by transfer, before they considered an application for disclaimer of onerous property. There was no undue delay on the part of the provisional liquidators when they applied for an extension of time in October 2002. Further, no prejudice was caused to any one by the delay in applying for a disclaimer.

11. It seems to me that good grounds have been made out for an extension of time to be granted. I give leave that the time for making an application to disclaim the property be extended to 3 October 2002, the date when the summons for disclaimer was issued.

Merits of the application

12. Mr Barma has referred me to relevant provisions in the Deed of Mutual Covenant in respect of Serene Court. It would appear from these provisions that:

(1) no undivided share in the land was allocated to the Property (First Schedule to the Deed);

(2) ownership of the Property does not carry with it any financial obligation in relation to the repair and maintenance of the common parts and facilities of the building, as such costs and expenses are to be borne by "the owners of flats on the first and upper floors" (Third Schedule, clause (d));

(3) ownership of the Property does not carry with it any right to participate in meetings of the Incorporated Owners (clause 13 of the Deed).

13. It was submitted that the above would distinguish the present case from Re Good Broad Ltd [2001] HKEC 876, in which Yuen J declined to give leave to liquidators to disclaim a property being a one-third share in the external wall of a building held by the company as a tenant-in-common with four others.

14. I agree with counsel that the present situation is different for the reasons already mentioned and the reason that the Property is registered in the sole name of the Company, so any potential liability attaching to the Property will not be transferred to co-owners.

15. Furthermore, in the present case, the purpose of the provisional liquidators' appointment is to dispose of all the Company's properties and upon the distribution of the net assets, the petition for winding-up will be dismissed and there will be a transfer of the shares to the opposing contributories. The Company will continue in existence and no question of bona vacantia would arise.

16. The Property is of no value and attracts a liability for rates. No other person is interested in the Property.

17. It seems to me that this would be an appropriate case to give leave to the provisional liquidators to disclaim the Property and I do so in terms of paragraphs 2 and 3 of the draft submitted. The form of the disclaimer and the notice of the disclaimer should follow Forms Number 39 and 40 in the Companies (Winding-up) Rules with appropriate alterations. I further order that the costs of this application are to be in the provisional liquidation.