HARRISON LTD v. THE REGISTRAR OF COMPANIES AND ANOTHER

HCMP 2121/2020

[2020] HKCFI 3112

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2121 OF 2020

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BETWEEN

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J U D G M E N T

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A. INTRODUCTION

1.  This is the hearing of the Amended Originating Summons (leave to amend is granted at the same time) whereby the Plaintiff applies for an order pursuant to section 42(1) of the Companies Ordinance (Cap. 622) that:

(a) The Notice of Change of Company Secretary and Director (Appointment/Cessation) (form ND2A No.22000756358) filed with the Companies Registry on 14 May 2015 be declared null and void ab initio and be removed from the Companies Registry;

(b) The Notice of Change of Company Secretary and Director (Appointment/Cessation) (form ND2A No.22000756360) filed with the Companies Registry on 14 May 2015 be declared null and void ab initio and be removed from the Companies Registry;

(c) The Notice of Change of Company Secretary and Director (Appointment/Cessation) (form ND2A No.22601258545) filed with the Companies Registry on 3 June 2015 be declared null and void ab initio and be removed from the Companies Registry;

(d) The Notice of Resignation of Company Secretary and Director (Appointment/Cessation) (form ND4 No.24000147763) filed with the Companies Registry on 16 July 2015 be declared null and void ab initio and be removed from the Companies Registry;

(e) The 1^st Defendant be directed to rectify the Plaintiff’s company information in the Companies Register forthwith by removing the 2^nd Defendant as director of the Plaintiff;

(f) The 1^st Defendant be directed to rectify the Plaintiff’s company information in the Companies Register forthwith by restoring Ho Chi Kin Sammy (“Ho”) as director of the Plaintiff; and

(g) The costs of the application be provided for.

2.  The Plaintiff’s application is supported by an affirmation made by Ho.  The four documents identified in paragraphs (a) to (d) of the Amended Originating Summons will be referred to as the 1^st, 2^nd, 3^rd and 4^th Disputed Document respectively, and as the Disputed Documents collectively.

3.  I am satisfied that the court documents had been properly served on the 2^nd Defendant, who did not file any acknowledgment of service.  The 1^st Defendant adopts a neutral stance, and its attendance has been excused.  It has, however, submitted a statement pursuant to s.43(2) of the Companies Ordinance.

B. THE FACTS

4.  The Plaintiff was incorporated in Hong Kong on 4 August 2004.  Ho was and is the sole shareholder and director.  He was advised by Mr Peter Wong of Messrs Nicecode Services Ltd that, without his knowledge and consent, on or about 22 May 2015, the 2^nd Defendant was registered in the Companies Registry as a director.  Ho stated that he did not know the 2^nd Defendant, he had no knowledge of the appointment, and the Plaintiff had never appointed the 2^nd Defendant as such.  Upon further search and enquiry, he discovered the Disputed Documents.   What they purport to show is that:

(a) First, Ho ceased to be director and was replaced by a Li Wai Ying Zenia, and Nicecode Services Ltd ceased to be secretary and was replaced by Trustworthy Secretarial Ltd on 29 April 2015 (1^st Disputed Document);

(b) Second, Li Wai Ying Zenia ceased to be director and was replaced by Kwan Man Hin on 6 May 2015 (2^nd Disputed Document);

(c) Third, Kwan Man Hin ceased to be director and was replaced by the 2^nd Defendant on 22 May 2015 (3^rd Disputed Document); and

(d) Fourth, Trustworthy Secretarial Ltd resigned as secretary on 3 August 2015 (4^th Disputed Document).

5.  On 5 October 2015, Ho lodged a complaint to the 1^st Defendant.  On 29 October 2015, the 1^st Defendant issued letters to Li Wan Ying Zenia, the 2^nd Defendant and Trustworthy Secretarial Ltd to seek their representations on the Plaintiff’s complaint.  On the same day, the 1^st Defendant informed Ho of the same.  On 23 December 2015, the 1^st Defendant informed Ho that it had not received any reply yet.  On 1 February 2016, Trustworthy Secretarial Ltd replied that it was instructed to file the Disputed Documents upon sight of various written resolutions and letters of resignation.  On 2 March 2016, the 1^st Defendant asked Ho to comment on the documents produced by Trustworthy Secretarial Ltd.   On 3 March 2016, Ho informed the 1^st Defendant that the Plaintiff had never passed those resolutions and he had never signed on the letters of resignation.  On 29 September 2016, the 1^st Defendant informed Ho that it had received conflicting information about the Plaintiff, and had added annotations to the Disputed Documents and an Important Note as well as remarks to the Plaintiff’s particulars on the public record to alter the public about Ho’s complaint.

6.  Ho procured Nicecode to file annual returns for the Plaintiff for the fiscal years of 2015, 2016, 2017, 2018 and 2019.  However, the 1^st Defendant declined to register the annual returns on the ground that the information stated therein was inconsistent with the information in the Disputed Documents kept at the Companies Registry.  The 1^st Defendant advised Ho to seek independent legal advice on whether to make an application under s.42 of the Companies Ordinance.

7.  At an extraordinary general meeting on 19 June 2020, the Plaintiff resolved to appoint Ho as director and to annul the status of the 2^nd Defendant. It appears to me that, if Ho had never resigned in the first place, it would not have been necessary to reappoint him as such.

C. THE LAW

8.  Section 42 of the Companies Ordinance provides that:

“ Registrar must rectify information on Companies Register on order of Court

(1) The Court may, on application by any person, by order direct the Registrar to rectify any information on the Companies Register or to remove any information from it if the Court is satisfied that—

(a) the information derives from anything that—

(i) is invalid or ineffective; or

(ii) has been done without the company’s authority; or

(b) the information—

(i) is factually inaccurate; or

(ii) derives from anything that is factually inaccurate or forged.

(2) If, in relation to an application for the purposes of subsection (1), a document showing the rectification is filed with the Court, the Court may require the Registrar to rectify the information by registering the document.

(3) This section does not apply if the Court is specifically empowered under any other Ordinance or any other provision of this Ordinance to deal with the rectification of the information on or the removal of the information from the Companies Register.

(4) The Court must not order the removal of any information from the Companies Register under subsection (1) unless it is satisfied that—

(a) even if a document showing the rectification in question is registered, the continuing presence of the information on the Companies Register will cause material damage to the company; and

(b) the company’s interest in removing the information outweighs the interest of other persons in the information continuing to appear on the Companies Register.

(5) If the Court makes an order for the rectification of any information on or the removal of any information from the Companies Register under subsection (1), the Court may make any consequential order that appears to it to be just with respect to the legal effect (if any) to be accorded to the information by virtue of its having appeared on the Companies Register.

(6) If the Court makes an order for the removal of any information from the Companies Register under subsection (1), it may direct—

(a) that a note made under section 44(1) in relation to the information is to be removed from the Companies Register;

(b) that the order is not to be made available for public inspection as part of the Companies Register; and

(c) that—

(i) no note is to be made under section 44(1) as a result of the order; or

(ii) any such note is to be restricted to providing information in relation to the matters specified by the Court.

(7) The Court must not give a direction under subsection (6) unless it is satisfied that—

(a) any of the following may cause damage to the company—

(i) the presence on the Companies Register of the note or an unrestricted note (as the case may be);

(ii) the availability for public inspection of the order; and

(b) the company’s interest in non-disclosure outweighs the interest of other persons in disclosure.

(8)  If the Court makes an order under this section, the person who made the application must deliver an office copy of the order to the Registrar for registration.”

9.  The relevant principles were set out by G Lam J in Re China Nice Education Research Publishing Investment and Management Co Ltd [2016] 3 HKLRD 525 at §§15-20. In short, under s.42, the Court may either rectify any information on the register or remove any information from it.  The fact that the information is incorrect, or relates to an invalid or ineffective transaction, or has been filed without proper authority of the company in question or that a document is a nullity or is one that should never have been registered, is not in itself a sufficient reason for removing it as opposed to rectifying it.  Removal should only be ordered if two conditions are satisfied: first, the applicant has to show that the continuing presence of the incorrect information will cause material damage to the company; and second, the company’s interest in removing the information outweighs the interest of other persons in the information continuing to appear on the register.  The structure of s.42 suggests that even forged documents are not necessarily to be removed unless the conditions in s.42(4) are satisfied.

10.  In Yuen Yin Kwan v Sino Insurance Brokers Group Ltd [2020] 1 HKLRD 1117 at 1129, §22, Recorder Stewart Wong SC held that s.42(4) shows a clear intention that the preferred method is rectification, rather than removal because an additional requirement is laid down for removal, namely that the continuing presence of the information on the Register will cause material damage to the company “even if a document showing the rectification in question is registered”; hence, only if a rectification is insufficient to avoid any material damage, which a removal can, then should a removal be ordered.

11.  In Re Forever Up Holdings Ltd [2018] HKCFI 2775, DHCJ William Wong SC at §16 took the view that the threshold for s.42(4) to be engaged is fairly low; and the Court is entitled to consider a wide range of factors in determining whether any damage would be caused to the company if the record persists, from misuse of forged documents to portrayal of a damaging impression to current and/or potential business partners or lenders.  In Re China Crown Holdings Ltd [2020] HKCFI 1615 at §33 and Re China People (Hong Kong) Ltd [2020] HKCFI 2873 at §54, Linda Chan J held that it is sufficient to show that the continued presence of the impugned documents will impede normal operation of the company and cause confusion to intended counterparts.

D. ANALYSIS

12.  In view of the unchallenged evidence given by Ho, the failure of the 2^nd Defendant to appear in these proceedings, and the failure of the other persons involved in the Disputed Documents (save Trustworthy Secretarial Ltd) to make any representation in response to the Plaintiff’s complaint, I am satisfied that the information stated in the Disputed Documents was false; and was derived from purported resolutions passed by the Plaintiff or letters of resignation signed by individuals which were forged or invalid and ineffective; and that the Disputed Documents were made without the Plaintiff’s authority.

13.  The Plaintiff sought an order for removal of the Disputed Documents.  However, the Plaintiff has not adduced any evidence on what material damage to the Plaintiff would be caused if the incorrect information is not removed.  There is not even any evidence on what business the Plaintiff is doing, or how its normal operation may be adversely affected if no order for removal is made.  While I accept that the threshold laid down by s.42(4) is fairly low, an applicant seeking an order for removal (instead of an order for rectification) is still obliged to adduce some evidence to convince the Court that the statutory criteria has been satisfied. After helpful discussions with Mr Cheung appearing for the Plaintiff, Mr Cheung accepted that an order for rectification would be sufficient.

E. CONCLUSION

14.  For the above reasons, I (a) make a declaration that the information stated in the Disputed Documents was factually inaccurate and they were filed without the Plaintiff’s authority, and (b) grant an order rectifying such false information.  The Plaintiff shall prepare and file amended documents to effect the rectification within 28 days of this judgment, and the 1^st Defendant shall register the same.  The Plaintiff must at the same time deliver an office copy of the Court order to the 1^st Defendant for registration pursuant s.42(8).  The 1^st Defendant shall also annotate the Disputed Documents currently registered in an appropriate manner upon registering the amended documents filed by the Plaintiff.  In this respect, the Plaintiff should follow the procedure set out in Yuen Yin Kwan v Sino Insurance Brokers Group Ltd [2020] 1 HKLRD 1117 at 1130-1133, §24.  In case of doubt, the Plaintiff should consult and liaise with the 1^st Defendant.  I also give liberty to apply.

15.  As to costs, there shall be no order as to costs between the Plaintiff and the 1^st Defendant whereas the 2^nd Defendant shall pay the costs of these proceedings to the Plaintiff assessed summarily at $5,000.