杭州日月電器股份有限公司 v. THE REGISTRAR OF COMPANIES AND OTHERS

HCMP 653/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 653 OF 2014

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J U D G M E N T

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Introduction

1.  This is an application (“Application”) by杭州日月電器股份有限公司 (“Applicant”), to reinstate the registration of Cretec Electronics (H.K.) Limited 顯譽電子(香港)有限公司(“Company”) to the Companies Register pursuant to section 765(2) of the Companies Ordinance, Cap. 622 (“Ordinance”).

2.  The Application is opposed by the 3^rd Respondent Mr Wang Xin (“R3”). The 1^st Respondent viz the Registrar of Companies (“R1”) takes a neutral stance.

Background

3.  The Company was incorporated in Hong Kong on 2 November 2005 as a company limited by shares.  According to its Annual Return filed with the Companies Registry, as at 2 November 2010, its only two shareholders were R3 holding 500 shares and Mr Wang Guo Qi holding the remaining 9,500 shares.  R3 was also a director of the Company.

4.  On the Applicant’s case, between April 2006 and March 2011, it has sold and delivered to the Company electrical products to the value of US$7,128,406.11. Despite repeated demands, the Company has paid only US$5,585,923.56 to the Applicant, leaving an unpaid balance of US$1,542,482.56 (“Unpaid Balance”).  

5.  In 2013, the Applicant commenced legal proceedings (“PRC Proceedings”) in HangzhouIntermediatePeople'sCourtof Zhejiang Province, PRC (“Hangzhou Court”) against the Company, Shanghai Cretec Electronics Limited 上海顯譽電子有限公司 (“Shanghai Cretec”) and R3.  In October 2013, the Company, Shanghai Cretec and R3 challenged the jurisdiction of the Hangzhou Court and applied to transfer the proceedings to the Shanghai Court (“Transfer Application”). The Transfer Application was dismissed by the Hangzhou Court.

6.  Meanwhile, unknown to the Applicant, the Company’s two shareholders passed a resolution on 4April 2011 authorising R3 to execute all documents pertaining to its application for deregistration. On 12 May 2011, R3 filed an application to the Companies Registry for “Deregistration of a Defunct Private Company” ie Form DR1. It was specifically stated in the Form DR1 that inter alia the Company had no outstanding liabilities and had ceased to carry on business or ceased operation for more than 3 months immediately before the application. As per the Gazette Notice published on 30 September 2011, the Company was deregistered on the date of publication of the said notice and was accordingly dissolved pursuant to section 291AA(9) of the Companies Ordinance, Cap. 32 (“predecessor Ordinance”).

7.  The deregistration and dissolution of the Company was only brought to the attention of the Hangzhou Court, and hence the Applicant, in the course of the Transfer Application in October 2013. The Hangzhou Court then directed that unless the Company was reinstated, the PRC Proceedings could not be allowed to continue.

Discussion

8.  Section 765(2) of the Ordinance provides:

“(2) Where acompany has been deregistered, and is dissolved, under section 291AA of the predecessor Ordinance, an application to the Courtfor the restoration of the company to the Companies Register may be made by a person who feels aggrieved by the deregistration.”

9.  Section 766(1)(b) of the Ordinance provides:

“(b) an application under section 765(2) must be made within 20 years of the deregistration.”

10.  Lastly, section 767(2) of the Ordinance provides:

“(2) The Court may grant an application made under section 765(2)if satisfied that it is just that the company be restored to the Companies Register.”

11.  On the evidence, the Applicant’s case is straightforward:

(1) it needs to apply to reinstate the Company in order to continue its claim against the Company;

(2) it has fulfilled the conditions laid down in the Ordinance in that it is aggrieved by the deregistration of the Company and the Application was made within 20 years of deregistration;

(3) as it has a genuine claim against the Company for the Unpaid Balance, it is just that the Company be restored to the Companies Register.

12.  In Re Active System Trading Ltd., unrep., HCMP 5173 of 2003, 17 May 2004,Tang J (as he then was) explained the court’s approach in an application under section 291AB(2) of the predecessor Ordinance[1] as follows:

“10. I do not believe the resolution of the dispute [between the applicant and the 3^rd respondent as to whether a District Court action by the applicant against the Company had been settled] should be conducted in this application. I am of the view, in line with the court’s approach when there is a bona fide dispute over debt on a winding‑up petition, on such an application the court should not go into the dispute. This is a relatively straightforward case and, as I said to Mr Cheung, I would be tempted to dispose of the matter as speedily as possible. However, in principle, the court on such an application should leave the parties to resolve their differences in the appropriate forum and in the appropriate way.

11. As is clear from the evidence filed so far on behalf of the parties, whether or not the District Court action had been settled depends on credibility of witnesses. I cannot say that there is not a bona fide dispute, and that being the case, I should proceed on the basis that the applicant has a bona fide claim against the Company for goods sold and delivered. That is sufficient for the purpose of section 291AB(2).

12. Mr Cheung has submitted that I must consider whether it is just to do so in all the circumstances. In my opinion, it would be just to do so. If there is a genuine claim against a deregistered company and the claimant wishes to bring action against the company, the circumstances would have to be very unusual indeed if the court were to refuse to reinstate the company. The fact that a company may be insolvent is not in my opinion decisive. The bona fide creditor should be allowed to pursue his claim in the usual way.” (emphasis added)

13.  Mr Lee, for R3, opposes the Application on two grounds.

14.  First, he said the Company did not owe the Applicant any money for goods sold and delivered. In his written submissions, Mr Lee has gone to great length in explaining the so-called discrepancies in the documentation which, according to him, “cast serious doubt on whether the Applicant has an arguable or bona fide claim against the Company.” His client’s case is that all outstanding debts were owed to the Applicant by Shanghai Cretec, rather than the Company. Second, the Company had no assets at the time of its deregistration in 2011, so that it would serve no useful purpose for this court to reinstate its registration. At the hearing, Mr Lee referred this court to a number of documents in the hearing bundle which appeared to suggest the Company had a zero balance in a bank account with the Royal Bank of Scotland as at January 2011.

15.  In my view, both grounds are hopeless.

16.  On the first ground, as pointed out by Tang J in Re Active System Trading Ltd, the resolution of factual disputes as to an applicant’s underlying claim against the deregistered company should not be conducted in an application like the present. Rather, the court should leave the parties to resolve their differences in the appropriate forum and in the appropriate way. If R3 asserts it is Shanghai Cretec, rather than the Company, which owes the Applicant money, that assertion can be tested in the usual way in ordinary civil litigation, whether in the PRC Proceedings or otherwise. It is not for this court in this Application to conduct a mini‑trial in order to determine whether and if yes how much of the Unpaid Balance was owed by the Company to the Applicant. On the totality of the evidence filed in this Application, I cannot say there is not a bona fide dispute as to whether the Company did owe the Applicant money for goods sold and delivered. If so, I should proceed on the basis that the Applicant has a bona fide claim against the Company.

17.  Regarding the second ground, taken to its highest, the documents relied upon by R3 simply show the Company had no cash in bank at the time of its deregistration. Since the Company’s audited financial statements were not in the evidence, it is difficult to see how Mr Lee can expect the court to accept at face value his client’s assertion that the Company had no assets whatsoever at the time of its deregistration. On the Applicant’s case, some of the Company’s assets have been wrongfully transferred to R3 in the PRC and if so, the Applicant may be able to pursue against R3 after succeeding in its claim against the Company in the PRC Proceedings. This is denied by R3 but that is not something which this court can finally adjudicate upon, one way or another, in this Application. In any event, the fact that a company may be insolvent is not a decisive factor in determining whether the court should exercise its powers under section 765(2) of the Ordinance: Re Active System Trading Ltd supra.

18.  In these circumstances, I am satisfied that, in the exercise of my discretion, I should grant an order reinstating the registration of the Company as prayed for in the Amended Originating Summons herein dated 15 July 2014.

Disposition and costs order nisi

19.  The Applicant having agreed terms with the 1^st Respondent in the event this Application succeeds, and in light of the absence of objection by Mr Lee, there shall be an order in terms of numbered paragraphs (1), (2), (3) and (5) as set out in the 1^st Respondent’s letter dated 13 June 2014, with liberty to apply.

20.  There shall also be an order nisi that the 3^rd Respondent do pay the Applicant’s costs, to be taxed if not agreed, with certificate for counsel.

(Peter Ng) Judge of the Court of First Instance High Court