KAM LEUNG SUI KWAN v. KAM KWAN LAI AND OTHERS

FACV No 4 of 2015

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

FINAL APPEAL NO 4 OF 2015 (CIVIL)

(ON APPEAL FROM CACV NO. 266 OF 2012)

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REASONS FOR DECISION

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A INTRODUCTION

1.  By a judgment handed down on 11 November 2015, it was ordered by the Court of Final Appeal that Yung Kee Holdings Limited (“the Company”) be wound up under s 327(3)(c) of the former Companies Ordinance Cap 32.[1] The order was made in winding-up proceedings instituted by the petitioner, the widow and personal representative of the estate of the late Kam Kwan Sing (“the deceased”).[2]  The Company was the fifth respondent but the principal adversaries were the petitioner on the one side and the first and second respondents on the other.[3]

2.  Although an order was made winding-up the Company, the Court imposed a stay of the winding-up order for 28 days to give the parties an opportunity to resolve their differences by agreeing on a price at which the petitioner’s shares in the Company could be purchased, alternatively that a mechanism to fix such the price could be agreed.[4] It was further ordered that in the event there was a failure to reach agreement before the expiration of the said period (or as extended by a single permanent judge), the winding-up order would take effect automatically.  The Court was minded to take this somewhat unusual step since the parties appeared amenable to such a course.

3.  The 28 day period was later extended by a consent order until midnight on 16 December 2015.  The parties failed to reach agreement before that date.  At about 4:58 pm on that day, a summons (supported by an affirmation of the second respondent) was issued by the first and second respondents applying to strike out the winding-up petition and having the winding-up order rescinded on the ground that the petitioner had acted unreasonably in seeking a winding-up order against the Company instead of pursuing an alternative remedy;[5] alternatively a permanent stay of the proceedings was sought on this ground.  The summons also sought an interim stay of the winding-up order by the Court until the application was disposed of.  The factual basis for the application was that the parties had been involved in negotiations since the Court’s order and (as submitted by the respondents) reasonable offers to purchase the petitioner’s share had been made but unreasonably refused.

4.  A letter to the Court from the solicitors for the first and second respondents accompanied the summons requesting an urgent application before a single judge seeking primarily an extension of the stay pending the hearing of the summons.  The application was heard at about 6:45 pm.  After hearing counsel for the respondents, [6] I dismissed the application for a stay and the summons itself, with reasons to be provided later.

5.  I shall at the conclusion of this judgment say something more about the jurisdiction of the Chief Justice to hear applications as a single permanent judge of the Court.  I deal first with the reasons for dismissing the respondents’ application.  In summary,  the summons was dismissed for two reasons:-

(1) There was no jurisdiction to make the orders sought in the summons.

(2) Even if there was jurisdiction, the application had no merits.

B JURISDICTION

6.  The summons was made returnable before a permanent judge of the Court of Final Appeal.  Reliance was placed on ss 17 and 46 of the Hong Kong Court of Final Appeal Ordinance[7] and to the inherent jurisdiction.  Section 17 is not relevant and no real reliance was placed on this provision: the reference therein to the powers of the Court of Final Appeal is a reference to a full court of five, not a single judge.  Section 46 defines the powers of a single permanent judge in the following terms:-

“(1) A single permanent judge may exercise the powers of the Court-

(a) to extend the time for making an application for leave to appeal; and

(b) to make an order for or in relation to bail under Part III,

but where the judge refuses an application to exercise any of these powers, the applicant shall be entitled to have the application determined by the Appeal Committee which for the purposes of this section may exercise all the powers of the Court.

(2) In an application for leave to appeal or an appeal, any incidental order or direction, not involving the decision of the application or appeal, any interim order necessary to prevent prejudice to the parties and any order for security for costs or for the dismissal of an application or appeal for default in furnishing security so ordered, may be made or given at any time by a single permanent judge.

(3) Any order made under subsection (2) may be discharged or varied by the Appeal Committee.

(4) The powers exercisable by a single permanent judge under this section may, subject to rules of court, be exercised in chambers.”

7.  Section 46(1) is not relevant, neither is the first part of s 46(2).  Mr Man, however, relied on the second part and submitted that the wording of that provision in relation to an appeal was wide enough to allow a single permanent judge to grant the relief sought by the summons.  The argument (as I understood it) went along the following lines: the relevant appeal was the main one heard (and determined on 11 November 2015) by the Court of Final Appeal and what was sought by the respondents by the present summons did not involve a decision in the appeal (since one had already been made); it was, however, incidental to it and was necessary to prevent prejudice, accordingly there was somehow jurisdiction to make the orders as prayed for in the summons.  This was unarguable.  Section 46 is intended to allow a single permanent judge to make incidental orders when there is an application for leave to appeal or an appeal proper in existence (as well as the other matters specified to in that subsection).  The wording of the provision cannot permit a single permanent judge effectively to set aside an order of the full Court of Final Appeal.  This is not an incidental matter.  There is no doubt that the respondents were seeking a setting aside of the Court of Final Appeal’s earlier order: they were seeking to have the original petition struck out and the winding-up order made by the Court, rescinded.

8.  Reliance was also placed on the inherent jurisdiction of the Court.  No submissions were made in this regard but this is again unarguable.  Whatever the ambit or limits of the Court’s inherent jurisdiction, it cannot be wide enough to allow a single permanent judge to set aside an order of the Court itself, particularly when the jurisdiction of a single permanent judge has been defined by statute.  It is to be remembered of course that the Court of Final Appeal is a creation of statute following what is set out in the Basic Law.

9.  Finally in this context, there is of course the argument that following the judgment on 11 November 2015, the Court was already functus save for the specific matters left open.[8] It will be recalled it was ordered that if the parties failed to reach agreement, the winding-up order would automatically take effect.

10.  There being no jurisdiction for a single permanent judge to grant the relief sought in the summons, it stood to be dismissed.  Even if jurisdiction somehow existed, however, it would have been dismissed on the merits. I now deal with this.

C  MERITS OF APPLICATION

11.  One of the issues before the Court of Final Appeal in the main appeal, as can be seen from the judgment, was whether a winding-up order should be made against the Company on the just and equitable ground under s 327(3)(c) of the Ordinance.  The basis of the present summons was that it was not just and equitable to wind-up since the petitioner was acting unreasonably in not pursuing another remedy, being as we have seen, refusing reasonable offers from the two respondents to purchase her shares.  This argument, if good, was however open to the respondents to have raised at the trial stage.  Not only was the point not raised at this stage, it was not raised before the Court of Appeal either and not even mentioned when the substantive appeal was heard before us.  Section 180(1A) of the present Cap 32 was in identical terms in the previous Companies Ordinance Cap 32.  The decision not to raise the point was perhaps due to the view of the merits taken by the respondents or perhaps for some other reason, but whatever the reason, as far as the application before me was concerned, it was simply far too late to raise it at this stage. Of course, the negotiations between the parties took place only after the handing down of the Court’s judgment and as mentioned earlier, the Court unusually gave the parties time to negotiate.  However, to take advantage of the leeway given and attempt to raise an argument based on s 180(1A) in such circumstances seemed to me to be impermissible to say the least.  The intention of the Court in giving the parties time to negotiate was that it appeared this might have resulted in an amicable resolution of the parties’ differences; the intention was certainly not for this to be a prelude to further litigation.

12.  Mr Man referred to Fuller v Cyracuse Limited for the proposition that an offer to purchase shares in a just and equitable winding-up petition can be made at any stage of the proceedings.[9] This may be permissible and appropriate in certain circumstances but in the present case, where judgment has already been given by the highest appellate court, it is far too late to seek such relief for the reasons already set out earlier.  The proposition in Fuller was made by the judge[10] in the context of a first instance hearing having regard to “active case management” and the “overriding objectives”.[11]

13.  For these reasons, the application stood to be dismissed on the merits as well.  I now deal with the question of the jurisdiction of the Chief Justice.

D  JURISDICTION OF CHIEF JUSTICE AS PERMANENT JUDGE

14.  I have already set out s 46 of the HKCFAO dealing with the jurisdiction of a single permanent judge of the Court of Final Appeal.[12] If, contrary to my earlier view, there somehow existed jurisdiction to deal with the summons under this provision, could the Chief Justice have dealt with it as a matter of jurisdiction?  The term “permanent judge” is defined in s 2 (the definition section) of the HKCFAO as a permanent judge appointed under s 7 of the Ordinance.  It is clear from s 7 as well as other provisions[13] that on their face it would appear that the Chief Justice cannot be a permanent judge.  But is this a bar then to the Chief Justice hearing applications as a single permanent judge under s 46 of the Ordinance?  In my view, it is not:-

(1) The Chief Justice, apart from being the head of the Judiciary having administrative duties,[14] also discharges judicial functions; he or she is a member of (indeed presides in) the Court of Final Appeal.  Accordingly, it makes no sense if the Chief Justice were not to be able to discharge the functions of a single permanent judge under s 46 of the Ordinance.  There is simply no reason why he or she cannot.

(2) As noted earlier, the term “permanent judge” (as defined in s 2) does not include the Chief Justice but the definition section contains the important, usual qualification that the stated definition applies “unless the context otherwise requires …”.  In the case of s 46, the context of the provision (together with its purpose which is to enable a single judge to deal with certain matters in relation to appeals) would clearly dictate that a judge of the Court of Final Appeal – of which the Chief Justice is clearly one – is able to deal with the matters set out in that provision.

(3) The judge referred to in s 46 must be a “permanent” one.  The Chief Justice, together with the other permanent judges, are the permanent judges of the Court of Final Appeal in contradistinction to non-permanent judges.