OCEAN TOP INVESTMENTS LTD v. DEJIN RESOURCES GROUP COMPANY LTD

HCMP 1307/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1307 OF 2014

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D E C I S I O N

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1.  On 29 May 2014 the Applicant issued an originating summons seeking an order that the Respondent do forthwith deliver to the Applicant a certificate for a convertible note in the principal amount of HK$55,000,000 pursuant to section 70(3) of the Companies Ordinance, cap. 32. Section 70, rather than section 324 of the new Ordinance, cap. 622, applies by virtue of section 60 of Schedule 11 of the Transitional and Saving Provisions (Companies Ordinance) cap. 622.

2.  The Respondent is incorporated in Bermuda and was registered at the material times under Part XI of the Companies Ordinance, cap. 32.  It is listed on The Stock Exchange of Hong Kong Limited.  The Respondent objects to the application for 2 reasons. First, it says that section 70 does not apply to foreign incorporated companies and, secondly, if it is wrong about that it thinks it likely that the certificate is sought in furtherance of a fraudulent scheme to defraud Mainland investors who have been lured into investing in convertible bonds to support applications under the Capital Investment Entry Scheme.

3.  I shall deal with the jurisdiction issue first.  Section 70(1) and (3) are in the following terms:

“70. Duties of company with respect to issue of certificates

(1) Every company shall, within 2 months after the allotment of any of its shares, debentures or debenture stock, complete and have ready for delivery the certificates of all shares, the debentures and the certificates of all debenture stock so allotted, unless the conditions of issue of the shares, debentures or debenture stock otherwise provide.

(1A) Every company (other than a private company) shall, within 10 business days after the date on which a transfer of any of its shares, debentures or debenture stock is lodged with the company, complete and have ready for delivery the certificates of all shares, the debentures and the certificates of all debenture stock so transferred, unless the conditions of issue of the shares, debentures or debenture stock otherwise provide.

(1B) Every private company shall, within 2 months after the date on which a transfer of any of its shares, debentures or debenture stock is lodged with the company, complete and have ready for delivery the certificates of all shares, the debentures and the certificates of all debenture stock so transferred, unless the conditions of issue of the shares, debentures or debenture stock otherwise provide.

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(3) If any company on whom a notice has been served requiring the company to make good any default in complying with the provisions of subsection (1), (1A) or (1B) fails to make good the default within 10 days after the service of the notice, the court may, on the application of the person entitled to have the certificates or the debentures delivered to him, make an order directing the company and any officer of the company to make good the default within such time as may be specified in the order, and any such order may provide that all costs of and incidental to the application shall be borne by the company or by any officer of the company responsible for the default.”

4.  Company is defined in section 2(1) to mean “a company formed and registered under this Ordinance or an existing company”.  Section 2(3) provides that “References in this Ordinance to a body corporate or to a corporation shall be construed as not including a corporation sole but as including a company incorporated outside Hong Kong.”  The Ordinance in various Parts deals with companies not incorporated under the Ordinance.

“308. Application of Ordinance to companies registered under former Companies Ordinances

This Ordinance shall apply to every company registered but not formed under the Companies Ordinance 1865 (1 of 1865), or the Companies Ordinance 1911 (58 of 1911), in the same manner as it is in Part IX of this Ordinance declared to apply to companies registered but not formed under this Ordinance:

Provided that reference, express or implied, to the date of registration shall be construed as a reference to the date at which the company was registered under the Companies Ordinance 1865 (1 of 1865), or the Companies Ordinance 1911 (58 of 1911), as the case may be.

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310. Companies capable of being registered

(1) With the exceptions and subject to the provisions contained in this section, any company formed whether before or after the commencement of this Ordinance, in pursuance of any Ordinance other than this Ordinance, or being otherwise duly constituted according to law, and consisting of one or more members, may at any time register under this Ordinance as an unlimited company, or as a company limited by shares, or as a company limited by guarantee; and the registration shall not be invalid by reason that it has taken place with a view to the company being wound up …

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326. Meaning of unregistered companies

(1) For the purposes of this Part, “unregistered company”(非註冊公司) includes any partnership, whether limited or not, any association and any company with the following exceptions –

(a) a company registered under the Companies Ordinance 1865 (1 of 1865), or under the Companies Ordinance 1911 (58 of 1911), or under this Ordinance;

(b) a partnership, association or company which consists of less than 8 members and is not formed or established outside Hong Kong;

(c) a partnership registered in Hong Kong under the Limited Partnerships Ordinance (Cap 37).

(2) For the avoidance of doubt, it is declared that in subsection (1), “unregistered company” includes a registered non-Hong Kong company.

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327. Winding up of unregistered companies

(1) Subject to the provisions of this Part, any unregistered company may be wound up under this Ordinance, and all the provisions of this Ordinance with respect to winding up shall apply to an unregistered company, with the exceptions and additions mentioned in this section.

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332. Provisions as to Establishment of Place of Business in Hong Kong

This Part shall apply to all non-Hong Kong companies, that is to say, companies incorporated outside Hong Kong which, after the commencement of this Ordinance, establish a place of business in Hong Kong, and companies incorporated outside Hong Kong which have, before the commencement of this Ordinance, established a place of business in Hong Kong and continue to have a place of business in Hong Kong at the commencement of this Ordinance.”

5.  It, therefore, appears clear that where the Ordinance refers to “company” it means a company formed and registered under the Ordinance or an existing company and that where it is intended that particular parts of the Ordinance apply to companies which do not come within the definition of “company” the Ordinance contains a section making this clear and uses appropriate descriptive terms.  It would appear to follow that section 70 does not apply to a company incorporated outside Hong Kong.

6.  Ms. la Fontaine Chung, who appeared for the Applicant, argued that the interpretation of “company” in section 70 was not restricted by the definition clause and should be extended to a company registered under Part XI.  Ms.Chung drew my attention to a decision of Kwan J, as she then was, in Registrar of Companies v Wah Sang Gas Holdings Ltd [2007] HKCU 844 in which the judge dealt with an application by the Registrar for an order against a Bermuda incorporated company pursuant to section 306 for a failure to comply with section 336(1) of the then enactment of the Companies Ordinance.  Section 336 was subsequently amended.  The application proceeded on the basis that section 306 applied.  Section 306, which is in Part VIII, reads as follows:

“306. Enforcement of duties under Ordinance by court order

(1) If a company or any officer of a company, having made default in complying with any requirement of this Ordinance, fails to make good the default within 14 days after the service of a notice on the company or officer requiring the company or officer to comply with that requirement, the court may, on an application made to it by any member or creditor of the company or by the Registrar, make an order–

(a) where the default was that of the company, directing the company and any officer thereof;

(b) where the default was that of an officer, directing that officer, to make good the default within such time as may be specified in the order.

(2) Any such order may provide that all costs of and incidental to the application shall be borne–

(a) where the default was that of a company, by the company or by any officer of the company responsible for the default;

(b) where the default was that of an officer, by that officer.

(3) Nothing in this section shall be taken to prejudice the operation of any enactment imposing penalties on a company or any officer of a company in respect of any such default as aforesaid.”

7.  The Respondent in Wah Sang Gas did not argue that section 306 did not apply to a foreign incorporated company.  I do not have to decide whether section 306 applies or not.  Assuming it does apply to foreign incorporated companies it is the only section (excluding section 70 itself) that either counsel could find where there was room for arguing that the drafter might have intended to refer to a foreign incorporated company, but used the word “company” which if it is given the meaning in section 2(1) would exclude such a company.  It does not seem to me that the fact that in one section “company” may include a foreign incorporated company means, as Ms. Chung seemed to suggest, that the court should construe the meaning of “company” in each section without regard to the definition in section 2(1).  Neither can I see any reason for thinking Part II of the Ordinance, which deals with share capital and debentures, is not limited in its application to companies as defined in section 2(1). 

8.  In conclusion in my opinion section 70 has no application to a company incorporated outside Hong Kong and that is the case whether or not it is registered under Part XI. I would add that it seems to me that the same is also true in the case of section 323 of the new Ordinance.  In the case of the new Ordinance the definition section makes this even clearer by expressly including in that section definitions of “company”, “non-Hong Kong company” and “registered non-Hong Kong company”.  Section 323 refers to “company” and I can see no basis for concluding that it was intended to extend to a “registered non-Hong Kong company”.

9.  So far as the second issue is concerned it seems to me from the affirmations that it is not a suitable matter for summary determination.

10.  I dismiss the originating summons.  The Applicant shall pay the Respondent’s costs.