RE TANG MUK KWAI

HCAG 8386/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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D E C I S I O N

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1.  In this matter, a non-trust corporation incorporated in Hong Kong applied for grant of probate as the sole executor named in the last will of the testator. Under Rule 34(3) of the Non-contentious Probate Rules [“NCPR”], the grant should be issued to its nominee.

2.  In the past, there has been a practice in the Probate Registry, following the practice in England, to inquire into the power of the corporation to take a grant through its nominee.  The practice is based on an English Registrar’s direction given in 1956, see Tristram & Coote’s Probate Practice 30^th Edn. Para. 4.40.  The purpose of the inquiry was to ensure that the taking of a grant would not be ultra vires the corporation.

3.  Since the amendment of our company law in 1997, a company incorporated in Hong Kong is not required to set out its object clauses in the memorandum of association.

4.  The effect of a company not setting out its object clause in the memorandum is now governed by Section 5A of the Companies Ordinance which was enacted in 1997.  Section 5A(1) provides that a company has the capacity and the rights, powers and privileges of a natural person.

5.  However, for a company with objects set out in its memorandum, the situation is governed by Section 5B.  Whilst Section 5B(1) prohibits a company from carrying on any business that is not authorized by its memorandum, Section 5B(3) reduces the hardship caused by the ultra vires doctrine under the common law by saving the legal effect of a transaction conducted by a company in contravention of Section 5B(1).

6.  In the present case, Supreme Trade Development Limited, the company in question, was incorporated in Hong Kong in 1993.  In 2005, the company adopted a new set of memorandum by a special resolution passed on 13 June 2005.  The new memorandum did not contain any object clause.

7.  In such circumstances, solicitor acting for the applicant contended that the power of the company is governed by Section 5A and there is no question about its power to seek a grant on account of such act being ultra vires.

8.  Solicitor for the applicant filed skeleton submissions in support of his contention on 9 September 2010 and there was a hearing before the Probate Master on 12 October 2010.  Since the hearing, on 8 November 2010, further submissions were filed.  On 17 December 2010, the Probate Master referred the matter to this court for decision.

9.  By a letter dated 7 January 2011, solicitor for the applicant indicated that he would not have further submissions to this court and the applicant is contented with this court deciding the matter without further oral hearing.

10.  In my judgment, with the adoption of the new memorandum in 2005, in conjunction with the effect of Section 5A of the Companies Ordinance, there is no doubt that the company would have the same power as a natural person to take up a grant.  Thus, the requisition as to the power of the company to take up a grant has been satisfactorily answered.

11.  In the course of correspondence between the solicitor and the Probate Registry, there was a reference to the case of Re the Estate of Leung Wai Jing HCAG 199 of 2002, 17 December 2003.  That case dealt with the constitution of a church rather than a company.  There was no suggestion in the judgment that the provisions of the Companies Ordinance applied to the church in that case.  In any event, that was a case where the memorandum of the church contained object clauses.  It was therefore a different case from ours.  Also there was no discussion as to the effect of Section 5B(3) in that judgment.  I do not think there is anything in that judgment which contradicts my above conclusion on the facts of the present case.

12.  It has been said that the effect of the amendments of the Companies Ordinance in 1997 was to abolish the doctrine of ultra vires in Hong Kong.  Thus, in the Review of the Hong Kong Companies Ordinance: Consultancy Report,  March 1997, at para. 3.05, the following commentary appears,

“As recommended by the SCCLR in 1992, the Companies (Amendment) Ordinance 1997 introduces new sections (5A, 5B and 5C) which have abolished the doctrine of ultra vires along the lines of the Canadian OBCA. Under the new provisions, an objects clause would be optional, and if the company does not state its objects, it would have the powers of a natural person. If a company’s memorandum states its objects, then its business activities would be restricted, but an act carried out in contravention of those restrictions would not be invalid. Although at its inception dubbed ‘admittedly a clumsy formulation’… this particular statutory formulation has proven singularly successful in eradicating the noisome doctrine of ultra vires.”

13.  Similar views can be found at Paul Kwan, Hong Kong Corporate Law (2006) p. 166 to 173.  See also Scott, Gilchrist & Vaizey, Company Law in Hong Kong, Practice and Procedure Para. 1.005.

14.  On the facts of the present case, it is not necessary for me to decide the position regarding a company with object clauses in its memorandum of association.  Given the development of the law since 1956, in particular the enactment of Section 5B(3) in Hong Kong, the need to continue with the old practice set out at the beginning of this Decision should be reviewed.  It should be noted that our 1997 amendments were modelled on Ontario legislation rather than UK legislation.  Thus, the developments in England may not be the same as those in Hong Kong.  However, in the absence of any arguments before me, I will leave the issue open for determination on another occasion.