RE 雲裔置業有限公司

HCMP 2564/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2564 OF 2013

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J U D G M E N T

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1. This is an application by 雲裔置業有限公司 (“Company”) for relief pursuant to s 122(1B)(a) and (b) of the Companies Ordinance, Cap 32 (“Ordinance”) in respect of the failure to meet the requirements under s 122(1) and (1A) of the Ordinance in connection with the laying of the Company’s income and expenditure accounts and balance sheets for the financial years ended 31 December 2007 to 2011.

2. There is a procedural irregularity which has, quite rightly, been raised by Ms Liang, who appears for the Company.  This application is made by way of an ex parte originating summons (“Summons”). Pursuant to O 102, r 2(2), an originating summons for this type of application should be in an expedited inter parte form (Form No 10).  However, it appears that there are cases where an application of this type was dealt with by way of an ex parte originating summons.  It is understandable why such an application was taken out in those cases as it might be thought that there was no party to be served.  I do not believe that the irregularity here is critical and I see no prejudice caused.  

3. The Company was incorporated on 26 September 1997.  It is limited by guarantee.  It is essentially owned by a kinship group and used as an investment vehicle to invest primarily in land, stock and investment funds for the benefit of its members. There are currently about 76 members of the Company and each of them is required to be a male descendent of Yan Wan Yui.

4. The directors of the Company (“Directors”) manage the affairs of the Company during their spare time.  They rely upon the professional service of the Company’s external auditors (“Auditors”) in respect of matters concerning statutory compliance.

5. This application is supported by 2 affirmations from the current Chairman of Company’s Board of Directors, 1 affirmation from its past Chairman and 1 from its past Treasurer. The circumstances of the infringements in question (“Infringements”) and how they came to light have been set out in the evidence.

6. The Company’s practice in relation to the meetings of its members between 2008 and 2011 was, briefly, as follows.  During those years, the Company held an AGM in spring where members were provided with an overview of its books of account.  The Company’s income and expenditure account, balance sheet together with the directors’ report and the auditor’s report (the audited financial statements) were laid before the members at an EGM held in the fall of each year.  The reason for such a practice was that the financial statements were not produced in time for the AGMs.

7. According to s 122(1) and (2) of the Ordinance, the Company should have laid its income and expenditure accounts and balance sheets at it AGMs.  Further, s 122(1A) provides that such accounts should be made up to a date not more than 9 months before the meetings.  s 122(1A) was not complied with in respect of the accounts for the year ended 31 December 2011.  That infringement has been explained in the evidence.  By the time of the EGM held in August 2012 where it was intended that the accounts for the year ended 31 December 2011 would be laid before the members, the Directors were aware of the various infringements and had obtained legal advice.  In order to ensure compliance with another statutory provision concerning the supply of the accounts to members prior to the meeting (s 129G of the Ordinance), the EGM was adjourned and consequently the 9-month period was exceeded at the time of the adjourned meeting.

8. These matters came to light when a member of the Company (“Complainant”) made a complaint to the Company Registry (“CR”).  In due course, the Company was notified by the Registrar of CR about the Infringements.

9. I should mention that the Complainant has sent a bundle of documents to this court (received on 16 January 2014).  However, it was not sent to the Company.  In the covering letter, a number of allegations were made against the management of the Company, some of which touch upon the matters which have to be considered in this application.  However, the Complainant has not appeared today despite the fact that these proceedings have been reported by the Directors to the members of the Company and that the Complainant is probably aware of this hearing.

10. In the absence of the Complainant and given the fact that much of his complaints have been addressed by the evidence before this court, which has been put on affirmation, I see no reason not to deal with these matters now.

11. The law is clear on what the court should consider in granting relief of this kind – whether the members were aware of the financial position of the Company and thus were not prejudice by the non-compliances; whether the defaults were inadvertent; and whether the obligations would be complied with in the future.  However, as pointed out by G Lam J in Kwan Wing Lok Michael & Anr v Tai Tau Tsai Environmental Engineering Ltd , unrep, HCMP 210/2013, 22 February 2013 at para 12, the matters which the court takes into account in deciding whether to exercise its discretionary power in question is not limited.

12. Further, application of this type is invariably unopposed.  It befalls upon the court to scrutinize the evidence put before it and to ensure that the application is properly justified.

13. I am satisfied that this application is justified.  The Infringements are certainly not the worst of their kind.  At all material times, the members were informed of the financial position of the Company and the audited financial statements were put before them at the EGMs.  Indeed, it appears that the financial matters of the Company were not complicated and I do not believe that the members were prejudiced.

14. It is unfortunate that the Directors were unaware of their obligations under the Ordinance.  On the other hand, this is a small investment company and it is not surprising that the Directors had relied upon the Auditors to advise them on the statutory requirements.  Regrettably, the Auditors had failed to discharge their duties properly.  I am satisfied that the Infringements were inadvertent.

15. Finally, I have no doubt that the Directors and the Company have learned an expensive lesson. Legal advice has since been obtained, which is reflected in the proper compliance of the statutory requirements in connection with the laying of the accounts for the year ended 31 December 2012.  I see no reason for similar infringement in the future.

16. In these circumstances, I grant the order sought in the Summons (filed on 3 October 2013) as amended.