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HCMP006570/2000
HCMP 6570/2000
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
MISCELLANEOUS PROCEEDINGS NO. 6570 of 2000
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IN THE MATTER OF DESIGN POSITIVE ARCHITECTS PLANNERS LIMITED (IN LIQUIDATION)
AND
IN THE MATTER OF SECTION 168H OF THE COMPANIES ORDINANCE (CHAPTER 32)
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THE OFFICIAL RECEIVER |
Applicant |
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AND |
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CHAN MIN SIMON |
Respondent |
Coram: Yuen J in Court
Date of hearing and Order: 20 September 2001
Date of Reasons for Order: 26 August 2002
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REASONS FOR ORDER
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1. This was an application by the Official Receiver for an order under s.168H Companies Ordinance that the Respondent be disqualified from being appointed as a director and from acting in management capacities in companies.
2. The application was not opposed by the Respondent, but submissions were made on his behalf on matters relevant to the order sought. At the end of the hearing, I made an order that the Respondent be disqualified for a period of 4 years.
3. At the hearing, both the Official Receiver and the Respondent requested that the Court adopt a procedure known in England as the "Carecraft" procedure, which apparently had not hitherto received judicial consideration in Hong Kong. I agreed that the procedure could be adopted for the reasons appearing below.
4. This procedure obtained its name from a decision of Ferris, J. in Re Carecraft Construction Co Ltd [1993] BCLC 1259, although it has since been modified by the Court of Appeal in England.
5. In England, director disqualification proceedings are taken under the Company Directors Disqualification Act 1986. The situations in which disqualification proceedings may be taken under the CDDA are similar to those under the Companies Ordinance, viz. for general misconduct, such as conviction of certain offences (s.2 CDDA, s.168E CO), persistent breaches of companies regulations (s.3 CDDA, s.168F CO), fraud in winding-up situations (s.4 CDDA,s.168G CO); or for unfitness, such as where a company has been wound-up and it is thought that the director's conduct renders him unfit to be a director or to be in a management capacity of a company (s.6-7 CDDA, s.168H CO) or after investigation by the authorities (s.8 CDDA, s.168J CO).
6. After the CDDA was passed, proceedings taken under it tended to be protracted. It was not until Carecraft that the court attempted to formulate a summary procedure which reduced the time and costs required for disqualification proceedings.
7. It is now generally accepted as a matter of substantive law that disqualification is not a "punishment", and that even though its purpose is "to protect the public against the future conduct of companies by persons whose past records as directors of insolvent companies showed them to be a danger to creditors and others" (Secretary of State for Trade and Industry v Griffiths [1998] BCC 836, 843F), disqualification proceedings are civil proceedings, applying the civil standard of proof on the balance of probabilities (Re Verby Print for Advertising Ltd, Fine & anor v Secretary of State for Trade and Industry [1998] 2 BCLC 23, 30-2) and adopting civil procedure.
8. In Carecraft, Ferris J considered the jurisdiction of the court to proceed in a summary way when the parties (the Secretary of State and the respondent director) were agreed that on certain facts which were not opposed, the director could be disqualified. The judge analysed the nature of disqualification proceedings and compared them with analogous types of proceedings (including criminal cases where the accused elected to plead guilty).
9. The judge observed that there was no jurisdiction "in which any court has held that there must be a full trial of all relevant issues, regardless of any agreement or admission of material facts" (at 345D). He arrived at the conclusion that the court did have jurisdiction to deal with disqualification proceedings summarily.
10. He made a number of observations relating to the summary procedure which have since been subject to variation by the Court of Appeal in England. However, the court's jurisdiction to deal with disqualification proceedings summarily has not been called into question, and indeed it has been said that "what is required and what the court should confine the parties to, is sufficient evidence to enable the court to adopt a broad brush approach" (Griffiths, 846D).
11. The director disqualification legislation in Hong Kong is based on the CDDA. I see no reason, whether in theory or in practice, why a similar summary procedure should not apply in Hong Kong.
12. Having said that, it is well-established that the Carecraft procedure does not mean that the Court could or would be asked to simply make a consent order. As succinctly stated in Secretary of State for Trade and Industry v Rogers [1997] BCC 155, the Carecraft procedure could effectively limit the facts, but the decisions whether that was a case for a disqualification order, and if so, for what period, remain those of the judge.
13. Thus, there must be evidence before the judge of the primary facts required in the legislation. The judge should consider facts which are agreed, or at least not opposed. It was held by the Court of Appeal in Rogers that the judge should not speculate on facts which have not been agreed or unopposed, and which have not been proved.
14. If the agreed or unopposed facts do not make out a case for a disqualification order, the judge would state that to be so, and the summary form of the proceedings would not be adopted; the applicant would then have to proceed with a full hearing.
15. If the summary procedure is adopted by the court, the judge would decide the period of the disqualification order; in so doing, the judge could also in his discretion consider a wide range of matters in mitigation (Griffiths, 845F), whilst adhering to the 3-tiered division ("not very serious", "serious" and "particularly serious" cases) in the range of periods of disqualification set out in Re Sevenoaks Stationers (Retail) Ltd [1990] BCC 765.
16. In the present case, I had considered the schedule of agreed facts (enclosed in the appendix to these Reasons for Order, see Re BPR Ltd [1998] BCLC 259). I was satisfied that a disqualification order should be made. Having considered the submissions of counsel for the respondent director in mitigation, including the fact that the company had itself suffered embezzlement at the hands of an accounts clerk, I was persuaded that this case fell into the upper end of the lowest range of "not very serious" cases, and I accordingly gave an order disqualifying him for a period of 4 years and that he pay the costs of the application.
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(MARIA YUEN) |
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Judge of the Court of First Instance |
Representation:
Mr MK Tam from the Official Receiver's Office
Mr Justin Ko instructed by Ng Lie Lai & Chan for the Respondent
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For hearing on 20.9.2001 at 10:00 a.m.
Before The Hon. madam Justice Yuen
in Court |
HCMP 6570/2000
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
MISCELLANEOUS PROCEEDINGS NO. 6570 OF 2000
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IN THE MATTER OF DESIGN POSITIVE ARCHITECTS
PLANNERS LIMITED (IN LIQUIDATION)
AND
IN THE MATTER OF SECTION 168H
OF THE COMPANIES ORDINANCE (CHAPTER 32)
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THE OFFICIAL RECEIVER |
Applicant |
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AND |
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CHAN MIN SIMON |
Respondent |
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SCHEDULE FOR CARECRAFT PROCEDURE
(Schedule of Facts Agreed and Facts Not Agreed)
Preliminary
1. The facts set out in this Schedule are made and agreed on the footing that the case against the Respondent will be dealt with the court summarily at the adjourned hearing of the Originating Summons on 20.9.2001. If the court is of the view that a full hearing is appropriate, all admissions or non-admissions of facts and all proposals for disqualification, the period of disqualification and costs (if any) shall not be referred to or relied on by either party at the hearing or further adjournment without the written consent of both parties.
2. The admissions made herein are made for the only purposes of the present disqualification proceedings. The Respondent reserves his right to require any person who seeks to establish any of the facts and matters referred to in this Schedule to prove such facts and matters to the satisfaction of any appropriate court without reference to any admissions made herein.
3. Under no circumstances shall any of the admissions in this Schedule be used by the Applicant or by any person whosoever (inclusive of the liquidator of Design Positive Architects Planners Limited or Europop Limited) for any other purposes whatsoever in any civil proceedings or criminal proceedings or any other quasi-legal proceedings against the Respondent.
Part 1 (Facts Agreed)
Background
re: DPAP Ltd.
4. Design Positive Architects Planners Limited ("DPAP Ltd.") was incorporated in Hong Kong on 16.12.1986 initially under the name of Newtime Design Limited. It changed to its present company name on 10.4.1987.
5. The Respondent was appointed a director of DPAP Ltd. on 22.1.1987.
6. Upon a creditor's petition for winding up filed on 3.1.1997, DPAP Ltd. was ordered by the court to be wound up on 5.3.1997 in Companies Winding-up No.5 of 1977 ("HCCW 5/1997").
7. The total amount of the proofs of debt filed in HCCW 5/1997 amounts to HK$341,531.40 and the total amount of assets that could be collected and realised is only HK$418.31. DPAP Ltd. was insolvent as at the date of winding up order (i.e. 5.3.1997). Names of creditors as at 19.7.1996 known to the Official Receiver & Liquidator are set out in the List of Creditors exhibited herein and marked "CBY-10".
re : EU Ltd.
8. Europop Limited ("EU Ltd.") was incorporated in Hong Kong on 13.1.1989.
9. The Respondent was appointed a director of EU Ltd. on 1.9.1990.
10. Upon a creditor's petition filed on 24.10.1996, EU Ltd. was ordered by the court to be wound up on 18.12.1996 in Companies Winding-up No.627 of 1996 ("HCCW 627/1996").
11. The total amount of the proofs of debts filed in HCCW 627/1996 amounts to HK$2,487,507.07 and the total amount of assets that could be collected and realized is only $23,909.98. EU was insolvent in August 1996 as well as at the date of winding up order (i.e. 18.12.1996). Names of creditors as at 19.7.1996 known to the Official Receiver & Liquidator are set out in the List of Creditors exhibited herein and marked "CBY-9".
Matters relating to the question of unfitness
A. Non-compliance with statutory filing obligation
re: GCH Ltd.
12. The Respondent was a director of Global Concept (Holdings) Limited ("GCH Ltd. ") [formerly known as Design Positive (International ) Limited and Standard Grade Services Limited] for the period from 20.12.1989 to 30.9.1999
13. The 3 Annual Returns of GCH Ltd. filed with the Companies Registry and made up to 20.10.1996, 20.10.1997 and 20.10.1998 respectively were filed on 31.8.1999. The late filing of the Annual Return of GCH Ltd. is as a result of a report by the Official Receiver to the Registrar of the Companies in January 1999.
14. The Respondent was responsible for the failure by GCH Ltd. to comply with the requirements of Sections 107 and 109 of the Companies Ordinance for the years of 1996 to 1998.
B. Accounting records offence
re: DPAP Ltd.
15. The Respondent as a former director of DPAP Ltd. is responsible for the failure by DPAP Ltd. to comply with the provisions of Section 121 of the Companies Ordinance.
16. The Respondent as a former director of DPAP Ltd. has failed to comply with the provisions of Section 274 of the Companies Ordinance.
17. The Respondent as a former director of DPAP Ltd. was convicted of the offences under Sections 121 and 274 of the Companies Ordinance on 4 January 1999 at the Western Magistracy and was fined $200.00 for each offence. True copies of the Brief Facts and the Schedules 1 and 2 mentioned therein relating to the said offences are annexed hereto and marked "Annexure 1".
18. The latest audited financial statement of DPAP Ltd. is that for the year ended 30 June 1994. The Respondent as a director of DPAP Ltd. is responsible for the company's failure to comply with the provisions of Section 122 of the Companies Ordinance for the years of 1994/95 and 1995/96.
re: EU Ltd.
19. The Respondent as a former director of EU Ltd. is responsible for the failure by EU Ltd. to comply with the provisions of Section 121 of the Companies Ordinance as particularised in Paragraphs 5 to 9 of the Affirmation of Chan Bik Yee Daisy filed on 22.12.2000 and the exhibits marked "CBY-1", "CBY-2", "CBY-3" and "CBY-4".
20. The Respondent as a former director of EU Ltd. has failed to comply with the provisions of Section 274 of the Companies Ordinance.
21. The latest audited financial statement of EU Ltd. is that for the year ended 31 March 1994.
22. The Respondent as a director of EU Ltd. is responsible for the company's failure to comply with the provisions of Section 122 of the Companies Ordinance for the years of 1994/95 and 1995/96.
C. The account systems
23. There was an emblezzlement of a total sum of about $370,000.00 to $480,000.00 by the accounts clerk of DPAP Ltd. and EU Ltd. in the year of 1995.
D. Misappropriation of property
24. In September 1995, EU Ltd. had acquired a property known as Unit No.2 on Level 11 and Carpark No.32 Kuen Yang International Business Plaza, Shanghai, PRC ("the Property") for a consideration of HK$2,244,980.00 under an Agreement for sale and purchase dated 18.9.1995 ("the Agreement"). A sum of HK$856,892.40 being deposit and part-payment ("the Deposit") was paid by EU Ltd. to the vendor pursuant to the Agreement.
25. By another Agreement dated 9.8.1996 ("the Cancellation Agreement"), it was agreed between EU Ltd. and the vendor that the Agreement would be cancelled and that the Deposit would be transferred to United Ground Investment (International) Limited ("UGI Limited") as the new purchaser of the Property. The Cancellation Agreement was made under the discussion of the Respondent and signed by him. UGI Ltd. has not accounted the Deposit to EU Ltd..
26. The shareholders and directors of UGI Ltd. at the time of the Cancellation Agreement were Chan Tat Eddie ("Eddie Chan") and Chan Chik. The relationship between the Respondent and Eddie Chan is brothers and that between the Respondent and Chan Chik is father and son.
27. At the time of entering the Cancellation Agreement in August 1996, the Respondent had not obtain any valuation report on the Property although he was of the view that the value of the Property had dropped substantially by that time.
28. During the period from about the end of 1995 to the beginning of 1996 various loans amounting to a total sum of about HK$0.9M to $1M ("the Loan" ) were lent by Eddie Chan, J & E Health Services Limited and/or UGI Ltd. to the Respondent, EU Ltd. and/or DPAP Ltd. However, the exact amount of each loan transactions and exact identities of the lender and borrower in each case cannot be ascertained due to the lack of proper books and records.
29. The Property was once intended the directors of EU Ltd. to be a security for the Loan but no charge or security had ever been created by EU Ltd. The transfer of the Deposit took place in August 1996 was intended by the Respondent to be a set-off of the Loan.
30. The Respondent had knowledge of the existence of the various creditors and the financial position of EU Ltd. at the time of the transfer of the Property.
Part 2 (Facts Not Agreed)
31. As to the misuse of bank accounts the Respondent denies that he had misused the bank accounts or that he had caused or issued cheques to the creditors of DPAP Ltd. and EU Ltd. without due regard to the likelihood of their being honoured upon presentment. The Respondent makes admissions only to the extent particularized in Paragraphs 28 to 34 of the Respondent's Affirmation filed on 26.2.2001.
Proposal for Disqualification
On the basis of the agreed facts set out in the above Schedule :-
32. The Respondent does not object to a disqualification order being made against him under S.168H of the Companies Ordinance on the basis that his conduct as director of DPAP Ltd., EU Ltd. and GCH Ltd. makes him unfit to be concerned in the management of a limited company; and
33. The appropriate period of disqualification shall be at the discretion of the court after hearing of the submissions of the parties.
Dated the 17th day of September, 2001.
| (Signed) |
(Signed) |
| (Ng, Lie, Lai & Chan) |
(Tam Man Kam) |
| Solicitors for the Respondent |
Senior Solicitor |
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for Official Receiver (the Applicant) |
"Annexure -1"
Summonses Nos. WSS22446/1998 & 22447/1998
Defendant - CHAN Min Simon
Brief Facts
1. Design Positive Architects Planners Limited (formerly known as "Newtime Design Limited" and "Design Positive Limited") ("the company") was incorporated under the Companies Ordinance on 16 December 1986.
2. Upon a petition filed on 3 January 1997, the Supreme Court of the Hong Kong made a winding-up order against the company on 5 March 1997 in Companies Winding-up No. 5 of 1997.
3. The Defendant was appointed as a director of the company on 22 January 1987.
4. By a letter dated 31 January 1997, the Defendant was advised of his responsibility to preserve and update the books of account of the company in accordance with S.121.
5. A letter dated 7 March 1997 enclosing a formal notice requiring delivery of books of account by the Defendant to the Official Receiver was sent to the Defendant.
6. A list of proper books of account which are required to be kept by the company pursuant to S. 121 and S. 274 is set out in Schedule 1 annexed hereto.
7. A list of books of account of the company recovered by the Official Receiver as at the date hereof is set out in Schedule 2 annexed hereto.
Dated this 21st day of September 1998.
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(Signed) |
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(Ms Fiona Lee) |
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Senior Solicitor |
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p.p. Official Receiver |
Schedule 1
A list of books of account which are required to be kept by the company pursuant to S. 121 Companies Ordinance.
| Description |
Period |
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| General Ledger |
6.3.90 to 5..3.97 |
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| Receipt Vouchers |
6.3.90 to 5..3.97 |
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| Payment Vouchers |
6.3.90 to 5..3.97 |
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| Journal Vouchers |
6.3.90 to 5..3.97 |
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| Bank Statements |
6.3.90 to 5..3.97 |
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A list of books of account which are required to be kept by the company pursuant to S. 274 Companies Ordinance.
| Description |
Period |
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| General Ledger |
4.1.95 to 3.1.97 |
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| Receipt Vouchers |
4.1.95 to 3.1.97 |
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| Payment Vouchers |
4.1.95 to 3.1.97 |
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| Journal Vouchers |
4.1.95 to 3.1.97 |
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| Bank Statements |
4.1.95 to 3.1.97 |
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Schedule 2
Books of account of the company recovered by the Official Receiver
| Description |
Period |
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| Audited accounts |
For the years ended 30.6.88-30.6.95 |
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| General ledger |
7/91-3/96 |
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| Receipt Vouchers |
7/94-3/95, 5/95-3/96 |
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| Payment Vouchers |
9/94-10/94, 1/95-3/96 |
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| Journal Vouchers |
7/95 -3/96 |
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HCMP6570/2000
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
MISCELLANEOUS PROCEEDINGS
NO. 6570 of 2000
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IN THE MATTER OF DESIGN POSITIVE
ARCHITECT PLANNERS LIMITED (IN LIQUIDATION)
AND
IN THE MATTER OF SECTION 168H
OF THE COMPANIES ORDINANCE (CHAPTER 32)
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| BETWEEN : |
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THE OFFICIAL RECEIVER |
Applicant |
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AND |
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CHAN MIN SIMON |
Respondent |
___________________________________________________
SCHEDULE FOR CARECRAFT PROCEDURE
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Filed this day of September, 2001.
Official Receiver's Office
10th Floor, High Block,
Queensway Government Offices
66 Queensway
Hong Kong
Tel: 2867 2460
Fax: 3105 0435
Ref: L71-5/5/1997(TMK/PDD)
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