ARF SV 1 S.à.r.l v. THE REGISTRAR OF COMPANIES

HCMP 224/2022

[2022] HKCFI 963

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 224 OF 2022

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BETWEEN

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DECISION

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1.  This is an application by originating summons dated 17 February 2022 (“the OS”) by ARF SV 1 S. à.r.l (“the Plaintiff”) for

(a) an order pursuant to section 765 of the Companies Ordinance, Cap. 622 (“the Ordinance”) to restore the name of Indo Venture Limited (the “Company”) to the Companies Register (“OS §1”);

(b) a limitation direction pursuant to section 768 (2) of the Ordinance (“OS §2”); and

(c) alternative to (b) above, a direction that the Plaintiff be at liberty to apply to the court to stop time running for the purposes of the Limitation Ordinance Cap 347 in prescribed circumstances (“OS §3”).

2.  The Official Receiver consents to OS §1 and adopts a neutral stance in respect of OS §§2 and 3.

3.  The parties have signed a consent summons attaching a draft order which inter alia provides for the restoration of the Company to the Companies Register and that OS §§2 and 3 be disposed of on paper.

Background

4.  The Company owed a sum of US $5,895,784.70 (“the receivables”) to Standard Chartered Bank (“SCB”). The receivables arose from transactions for the purchase of diamonds in April 2016 and were assigned to SCB at about the same time pursuant to a receivables purchase agreement dated 11 January 2013 (“the RPA”).

5.  The Company was notified of SCB’s interest in the receivables under the RPA but failed to pay any part of the receivables on their respective due dates in April 2016.

6.  By letter dated 12 February 2019 to the Company, SCB demanded payment. A month later, on 14 March 2019, the Company requested a notice of no objection to a company being deregistered (“the notice”) and obtained the same from the Commissioner of Inland Revenue on 30 July 2020.

7.  Meanwhile, on 28 February 2020, SCB sent a 2^nd letter to the Company demanding payment.

8.  6 months later, on 12 August 2020 (shortly after obtaining the notice), the Company filed its deregistration application. It was made by Dhotre Pravinchandra Dattatraya (“DPD”), the Company’s sole shareholder and one of its directors. DPD certified that the Company had no outstanding liabilities.

9.  The Company was de-registered on 5 February 2021.

10.  On 24 September 2021, SCB assigned its rights in the receivables to the Plaintiff who intends to take action against the Company to recover the same but was unable to do so because the Company had been deregistered.

11.  The Plaintiff gave notice of these proceedings to the former directors of the Company including DPD by letter dated 22 February 2022 delivered by courier. Notices were also sent to the last known addresses of the shareholders/directors appearing in the last annual return of the Company.

Legal principles

12.  This application involves sections 750 (2), 765 (3), 765 (4), 766 (1) (c), 767 (3) and 768 (2) of the Ordinance. Mr Terrence Tai, counsel for the Plaintiff helpfully summarised their effect as follows:

(a) Any creditor or any other person who has an interest in the matter may make an application to the court for the restoration of the company that has been deregistered: sections 765 (3) (b) and 765 (4).

(b) An application under section 765 must be made within 20 years after the date of dissolution of the company: section 766 (1) (c).

(c) The court may grant an application made under section 765 (4) to restore a deregistered company if satisfied that any of the requirements specified in sections 750 (2) (a)-(e) was not met, or it is otherwise just that the company be restored to the Companies Register: section 767 (3) (b).

(d) Section 750 (2) (c) provides that an application for deregistration must not be made unless, at the time of the application, the company has no outstanding liabilities.

(e) The court has the power to give directions and make orders as seem just for placing the company and all other persons in the same position as nearly as may be as if the company had not been dissolved: section 768 (2).

13.  For the purposes of reinstatement of a company under section 767 of the Ordinance,

“it was sufficient that the applicant had a bona fide dispute against the company. If there was a genuine claim against a de-registered company, the circumstances would have to be very unusual for the court to refuse to reinstate the company … in an application for reinstatement, the court should leave the parties to resolve their substantive differences in the appropriate forum and in the appropriate way”:

see per Tang J (on section 291AB of the predecessor ordinance to the Ordinance which is the equivalent of section 767 of the Ordinance) in Re Active System Trading Limited, unrep., HCMP 5173/2003, 17 May 2004[1].

14.  Further, the creditor should be allowed to pursue its claim in the usual way and the fact that the company may be insolvent is not a decisive factor: Re Active System Trading Limited and Re Raison Leather Co Ltd [2020] HKCFI 1631 at §22.

This application

(a) Restoration to the Companies Register

15.  Given the facts as stated, in applying for deregistration the Company failed to meet one of the prescribed preconditions, namely, that it had no outstanding liabilities at the time it made its application. Despite having notice of SCB’s demand for payment of the receivables, the Company proceeded with its deregistration application, thereby contravening section 750 (2) (c).

16.  It is the Plaintiff’s intention as assignee to take action against the Company to recover the receivables.The consent order requires the Plaintiff to proceed diligently with its claims against the Company for the recovery of the outstanding liabilities due and owing to the Plaintiff and provides for regular written reports by the Plaintiff to the Registrar of Companies.

17.  In the circumstances, it is clear that the Company should be restored to the Companies Register.

(b) The limitation direction

18.  I now turn to consider the limitation direction and, if applicable, its alternative (OS §§2 and 3).

19.  OS §2 seeks a limitation direction which would stop time running for the purposes of the Limitation Ordinance in the following terms:

“2. There be a direction that in the case of creditors with claims against the Company which were not statute barred at the date of the Company’s dissolution, the period between the date of dissolution and the date of restoration of the Company to the Companies Register (the “Dissolution Period”) shall not be counted for the purposes of the Limitation Ordinance (Cap. 347) pursuant to Section 768 (2) of the Ordinance.”

20.  The court’s power under section 768 (2) includes the power to issue a direction to stop time running for the purposes of the Limitation Ordinance: Re Donald Kenyon Limited [1956] 3 All ER 596 at 599C-H per Roxburgh J (in the context of the Companies Act, 1948, section 353 (6)[2] which section is in all material respects identical to section 768 (2) of the Ordinance).

21.  More recently, the English Court of Appeal held that the making of a limitation direction requires the applicant to show a clear causal link between the dissolution and the failure to bring proceedings within the applicable limitation period see per David Richards J in Pickering v Davy [2017] BCC 171 at §§51 and 60.

22.  In the present case, the evidence is that the Plaintiff instructed its solicitors to commence proceedings after acquiring the right to recover the receivables in September 2021. When steps were taken in November 2021 to do so, it transpired that the Company had been deregistered in February 2021.

23.  The relevant limitation period for the recovery of the receivables is 6 years from the due dates of the 3 invoices which constitute the receivables. Those dates will fall in August and September 2022. With the Company restored to the Register on the consent summons being approved by the court in this application, no limitation issue should arise.

24.  The limitation direction sought in OS §2 was apparently made out of an abundance of caution, in case this application should not have been resolved in time. That eventuality should not now materialise.

25.  In my view, the causal link considered in Pickering v Davy is absent because any action brought by the Plaintiff between the date of this order and prior to 19 August 2022 (which is the expiration date for limitation purposes under the 1^st of the 3 invoices) would not be out of time.

26.  As an alternative, the Plaintiff seeks a specific direction[3] that

“the Plaintiff be at liberty to apply to the Court, in the event that a limitation defence is taken in subsequent proceedings, to seek an order to stop time from running for the purposes of the Limitation Ordinance (Cap. 347), during the period between the date of dissolution and the date of restoration of the Company to the Companies Register.”

27.  In my view, the alternative direction sought will offer the Plaintiff adequate protection in the (unlikely) event of a limitation defence been raised. A similar direction was made in Re Sino Link Group Limited, unrep., HCMP 428/2009, 31 March 2010 at §39.

28.  Accordingly, there is to be

(a) an order in terms of the consent summons; and

(b) an order in terms of the direction set out in §26 above with liberty to apply.

29.  As regards costs, the Plaintiff has agreed to pay the costs of the Registrar of Companies in the sum of $5000 in lieu of taxation.

30.  As regards the Plaintiff’s own costs, adopting the approach in Re Active System at §14, those costs be reserved pending the determination of the Plaintiff’s claim against the Company with liberty to apply.