THE OFFICIAL RECEIVER v. WONG BUT SIT JASON AND OTHERS

HCMP203/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.203 OF 2002

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J U D G M E N T

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The application

1. This is an application by the Official Receiver by originating summons dated 18 January 2002 under section 168H of the Companies Ordinance, Cap.32 (“the Ordinance”) for a disqualification order against each of the three respondents in terms of section 168D of the Ordinance.

2. The 1^st respondent Mr Wong But Sit Jason and the 2^nd respondent Madam Chu King Yee, also known as Mrs Egna Wong Chu King Yee do not intend to contest these proceedings and they have not filed any affidavits in opposition to the first report of the Official Receiver filed on 18 January 2002.

3. The 3^rd respondent Mr Lo Kwai Sang Dennis originally intended to defend this application and has filed an affirmation in opposition on 6 November 2002.  However, just the day before the hearing of the application herein, the Official Receiver and the 3^rd respondent have agreed to dispose of the proceedings by way of the shortened form of procedure sanctioned in the case of Re Carecraft Constructions Co. Ltd [1994] 1 WLR 172 as clarified by the decision of the Court of Appeal in Secretary of State for Trade and Industry v. Rogers [1996] 1 WLR 1569.  A “Statement of Facts Not In Dispute For The Purposes Of Carecraft Settlement As Between The Official Receiver And The 3^rd Respondent” was filed the day before the hearing of this application by the court.  The purpose of this Statement is to identify, in relation to the allegations of unfitness relied on by the Official Receiver, the core material facts which, for the purposes of a Carecraft disposal of these proceedings and any application by him under Sections 168D and 168Q of the Ordinance only, are not disputed by the 3^rd respondent.

4. I shall come back to this Carecraft disposal or procedure in respect of the 3^rd respondent when I consider the 3^rd respondent’s position.  Suffice it for me to say here that the 3^rd respondent has applied in chambers for leave under section 168D to be a director of three companies notwithstanding his submission to the sanction of disqualification against him.

C.A. Pacific Finance Limited (“CA Fin”)

5. CA Fin was incorporated in Hong Kong on 22 October 1992 and its present name was adopted on 25 May 1995.  Its authorised share capital comprised 10 million ordinary shares of HK$1 each, all of which were issued and paid up.  The shares were owned by C.A. Pacific Group with the remaining one share owned by C.A. Management Ltd which was also the company secretary of CA Fin.

6. The directors of CA Fin on record were as follows :

Recorded Directors	From	To
Alex Wong	29/11/1993	21/03/1995
Chan Siu Kwan	29/11/1993	21/03/1995
Martin Hsi Wu Wong	29/11/1993	21/03/1995
One Mr Hui	29/11/1993	21/03/1995
Wong But Sit Jason (1st respondent)	20/12/1992	21/03/1995
Lo Kwai Sang Dennis (3rd respondent)	21/03/1995	18/12/1997
Chu King Yee (2nd respondent)	21/03/1995	19/01/1998 (date of liquidation)
Lun Chan Kui	12/08/1996	15/01/1997
Vincent Hoe York Joo	18/12/1997	date of liquidation

7. It can be seen from the aforesaid record that the 1^st respondent ceased to be a director of CA Fin on 21 March 1995 and the 2^nd respondent, being the 1^st respondent’s mother, became a director thereafter up to the date of liquidation.  The 3^rd respondent also on the same day became a director until he resigned on 18 December 1997, shortly before the date of liquidation.

8. The Official Receiver’s case is that the 1^st respondent was a de facto and/or shadow director of CA Fin in spite of the fact that he resigned in March 1995.  He actually ran and/or controlled their affairs and exerted considerable influence and control over the management, corporate affairs and trading activities of CA Fin.

9. CA Fin ceased trading on 16 January 1998 and a winding-up petition was presented against it on 19 January 1998.  Provisional Liquidators were appointed on 21 January 1998 and CA Fin was wound up by the court on 4 June 1998 and Liquidators were appointed on 10 June 1998.  When CA Fin went into liquidation in 1998 it was insolvent.

C.A. Pacific Securities Limited (“CA Sec”)

10. CA Sec was incorporated in Hong Kong in another name on 8 September 1987 and it changed to its present name from May 1995 as CA Fin.

11. The authorised share capital of CA Sec was $30 million and they comprised 3,000 ordinary shares of HK$10,000 each, all of which were issued and paid up.  The shares were owned by the following persons, namely :

Shareholders	No. of Shares	Percentage of shareholding
Hai Tong International Holdings	2,399	79.967
Chu King Yee (2nd respondent)	540	18
H Wong	60	2
CA Man	1	0.033

12. The directors of CA Sec on record were as follows :

Recorded Directors	From	To
Chu King Yee (2nd respondent)	03/10/1987	date of liquidation
H Wong	03/10/1987	19/03/1996
Wong But Sit Jason (1st respondent)	12/05/1988	16/02/1990
	17/07/1995	20/01/1998 (date of liquidation)
Lo Kwai Sang Dennis (3rd respondent)	18/09/1995	18/01/1998
HC Chan	01/05/1996	date of liquidation
Cheung	15/04/1997	date of liquidation

13. It can be seen from the record that Madam Chu, the 2^nd respondent was a director from October 1987 up to the date of liquidation of the company.  Mr Lo, the 3^rd respondent, was a director from September 1995 up to 18 January 1998 when CA Sec ceased trading.

14. The Official Receiver submitted in the first report that the 1^st respondent was actually a de facto and/or shadow director of CA Sec.  Again he ran and/or controlled their affairs and exerted considerable influence and control over the management, corporate affairs and trading activities of CA Sec.

15. CA Sec ceased trading on 16 January 1998.  A winding-up petition was presented against CA Sec on 20 January 1998.  Provisional Liquidators were appointed in respect of CA Sec on 21 January 1998.  CA Sec was wound up by the court on 4 June 1998 and Liquidators were appointed on 10 June 1998.

16. When CA Sec went into liquidation in 1998 it was insolvent.

Nature of business of CA Sec and CA Fin

17. The nature of CA Sec’s business was securities dealing and it was registered under the Securities Ordinance and as such was regulated by the Securities and Future Commission (“SFC”).

18. CA Sec did not provide any financing to its clients and all trades executed by CA Sec were to be settled in cash.  When its customers required credit facilities to finance their share dealings, such was made available by CA Fin.

19. The nature of CA Fin’s business was moneylending and it was a registered money lender under the Money Lenders’ Ordinance, Cap.163.  It was not a registered securities dealer and therefore was not itself regulated by the SFC.  As part of its operations, it provided margin facilities to the clients of CA Sec.  CA Sec had to look to the financial resources of CA Fin to meet its obligations to CCASS.

20. Although there was separate account opening documentation of CA Fin and CA Sec, a significant proportion of CA Sec’s clients were asked to sign CA Fin’s account opening documentation even though they never intended to borrow funds on a margin basis from CA Fin.  By signing these documents, the shares owned by the clients became vulnerable to being pledged by CA Fin.

21. The majority of CA Sec’s clients sought financing from CA Fin and transactions for clients for both CA Fin and CA Sec were effected through CA Sec’s account at CCASS.  This close inter-connection between the business of CA Fin and CA Sec resulted in the prospects of each company being heavily dependent upon the performance of the other.  The failings in the manner in which the business of CA Fin was managed had a serious effect on CA Sec.

The SFC action

22. On 11 June 1997 an inspection of CA Sec by SFC began.  As a result of its enquiries, ISD of SFC became concerned over CA Fin’s exposure to margin loans secured against the shares of Leading Spirit and LS Conrowa.  The SFC’s inspection report in relation to CA Sec was updated in July 1997.  SFC inspection report in relation to CAP Group in July 1997 identified the following points of concerns, inter alia :

(1)	a number of breaches of regulatory requirements and internal control deficiencies;
(2)	some substantial uncollateralised or insufficiently collateralized loans;
(3)	the transfer to clients’ securities to the bank accounts of connected individuals; and
(4)	the SFC had concerns about the financial soundness of CA Fin given that there was a shortfall of $64.8 million in relation to loans extended to margin clients.

23. The SFC was concerned about the manner in which CA Sec operated, which failed to provide adequate protection to its clients and about the ability of the CAP Group to operate in the event there were to be any movement in the market or withdrawal by clients.  The SFC was considering to issue a restriction order on CA Sec and CA Fin.  What the SFC wanted to achieve was that securities of CA Sec’s clients should only be used to raise finance for client securities trading business and should not be used for other, unrelated financing business of CA Fin.  The purpose of seeking proposal from the CAP Group was to meet the SFC’s aim to protect the interests of CA Fin and CA Sec and of their creditors, account holders and shareholders and to ensure that the companies could continue trading.

24. Subsequently, the 1^st respondent submitted a proposal on behalf of the CAP Group companies to the SFC.  This proposal included the repayment or collateralisation of certain loans to connected clients, the transfer of client securities out of bank accounts in the names of connected individuals and the segregation of the securities margin business and other financing business by the end of 1997.  These proposals were essential for the protection of creditors and customers of CA Fin and CA Sec.  They were made on behalf of CA Fin and CA Sec to the SFC to avoid a restriction notice being issued by the SFC against CA Sec, as a result of the SFC’s concerns about the conduct of the business of the companies.  When accepting the proposal, the SFC required CA Fin to notify the SFC of any material changes in circumstances. 

25. However, a number of the proposals were not in fact fulfilled and the consequences were very serious.  As can be seen from what happened after the 1^st respondent’s proposal (“the Proposal”).

The China Star misfeasance

26. In breach of this Proposal and unknown to the SFC, very substantial sums of money were transferred from CA Fin to one China Star between September and December 1997 to a total of nearly $249 million.  These sums were paid to the benefit of China Star to fund the deposit for the purchase of the Century Square Building in Central.  These transfers of funds were caused or procured by the 1^st respondent and they were wrongful abstractions of CA Fin’s assets.  The irrecoverability of these advances was a substantial factor in the failure of CA Fin’s business and a major cause of the insolvency of CA Fin and CA Sec and of loss to their creditors, shareholders and customers.

27. China Star was a shelf BVI company which was not at any material time a subsidiary of or under the legal control of CA Fin or any other group company and was not at any material time brought into the CAP Group.  This is the submission of the Official Receiver since the shares of the company are bearer shares certificate.

28. It is common ground that no board resolution was ever passed authorising any the payments to China Star.  Nor were there any board minute authorising any loan to be made to China Star or authorising the 1^st respondent to sign the loan agreement.  It is the Official Receiver’s case that none of the directors did in fact authorise or consent to the withdrawal of these funds of CA Fin from its Liu Chong Hing Bank for China Star.  Further, it is clear that no security or contingency plan was in place and that the proposed acquisition was on such a scale that it was beyond the financial capability of the CAP Group as a whole.

29. The transfers of fund made to China Star also constituted a material change or changes in circumstances which the 1^st respondent failed to disclose to the SFC.  Further, the way in which he organised and conducted the transfers and the later reporting of exposures to the SFC positively concealed the true state of affairs surrounding the transfers made to China Star from the SFC, knowing that they would not approve and that there would be a substantial risk of action by them if they discovered the transfers.  This failure to disclose prevented the SFC from acting earlier to protect the interests of the investors.

30. The Official Receiver submitted in her First Report that the 1^st respondent (para.262) “deliberately and dishonestly concealed facts about the transfers made to China Star from third parties such as the SFC, the appointed directors of CA Fin, the account holders and shareholders of CA Fin and CA Sec, and CA Fin’s auditors.  It is to be inferred from this that he knew his actions were unauthorised and improper.  Whether he intended originally to make a secret profit for himself and/or his wife or whether he was covering up in respect of a rash and hazardous speculation, his actions were dishonest and show him to be completely unfit be a director.  It is submitted that he is a menance to the investing public”.

31. The 1^st respondent in his submission before this court contended that China Star is part of CAP Group since the bearers’ shares certificate was kept by the Group.  However the Official Receiver reports submitted that (see para.265 thereof) :

“The transfers related to the purported acquisition of Century Square, which was funnelled through a BVI company owned by Kong [the 1^st respondent’s wife] and which was never brought into the CAP Group and hence the true state of affairs was not disclosed.”

32. However, it would seem that the 1^st respondent, as submitted by Mr Godfrey Lam, counsel for the Official Receiver, was saying different things to different persons on different occasions :

(1)	The 1st respondent told the police that China Star was part of the CAP Group.  He claimed that the company was formed for CAP Group and that China Star was the vehicle to purchase the Building; and
(2)	According to Wan Yiu Kwan (“Wan”) in his private examination, the 1st respondent told Wan at the time that China Star was an independent third party.  Wan stated during his private examination that had he been told that China Star was a BVI company with its bearer share held by Kong and its purchase money funded by CA Fin, he would not have considered it to be an independent third party.
	(See para.266 of the First Report.)

33. In fact when ISD of the SFC inspected CA Fin again on 22 October 1977 to ascertain the impact of the market crash on CA Fin, it appears from the SFC’s notes of this meeting that CA Fin was put under daily monitoring in view of the SFC’s concerns over its liquidity and its status of an unsecured “loan” of $103 million to CA Man which unknown to ISD included the aggregate unauthorised payments up to that date to or for the benefit of China Star (and margin loans to S.L. Wong Ye and Yan Sheng Bang).  This note recorded that CA Fin submitted daily updates only up to 12 November 1997.  A margin evaluation report as at 14 November 1997 was submitted by CA Fin.  The China Star unauthorised abstractions or “loan” as such did not come to ISD’s attention during this inspection or from CA Fin’s report.  This plainly was the deliberate deception by the 1^st respondent in disguising those payments and thereby dishonestly misleading ISD/SFC (see para.166 of the First Report).

34. From the evidence presented by the Official Receiver and summarized in the First Report I accept the Official Receiver’s submission that the 1^st respondent actually lied about the relationship between his wife’s company and the CAP Group, and concealed important facts from third parties, which indicates a lack of honesty and commercial probity on his part.

35. Further, I also accept the submission that the monies transferred from CA Fin were paid for the benefit of China Star which was in fact a company owned by the 1^st respondent and/or his wife Kong.  Accordingly by making these transfers the 1^st respondent wrongfully procured for himself at the expense of CA Fin and his creditors/shareholders.  The 1^st respondent’s contention that the monies advanced to China Star was for the purchase of Century Square, which in turn was intended to be a purchase for the CAP Group, is not credible in light of the evidence of other CAP officers, including A. Wong.  Further, China Star, CA Fin and/or CA Sec could not meet the purchase price of Century Square for $1.2 billion.

36. It is also specifically contradicted by the evidence of the 3^rd respondent who denied authorising the said transfer.  He contended that he did not know of the transfer to China Star until a meeting held on 13 October 1997.  His evidence was that he never attended any board meeting at which the loan agreement dated 23 September 1997 was approved, and that he never authorised anyone to buy Century Square or to set up a BVI company for that purpose.

37. The 2^nd defendant Madam Chu is the mother of the 1^st respondent.  Her evidence in the private examination was to the effect that she had passed her authority to the 1^st respondent, whilst she had not attended any board meeting of CA Fin in order to approve the said transfer.  She said the 1^st respondent had informed her about the purchase price, how the payments would be made, and when the payments would be made in addition to the fact that it would be bought in the name of an off-shore company, a BVI company.  Thus by her own admission, her involvement in this China Star purchase of this Century Square was much more than the 3^rd respondent.  

38. However, even the 1^st respondent contended in his written mitigation that “the whole incident (i.e. the incident of the collapse of the C.A. Pacific Group) was caused by a bad and wrong-timing decision made by the Wong’s family on the purchase of Century Square intended for the benefit of the C.A. Pacific Group in late 1997.”  In other words to take the case of the 1^st respondent at its highest according to the submission of Mr Wong in mitigation, the decision was made by the Wong’s family and it was at least for the benefit of C.A. Pacific Group of which the Wong’s family was a part and in control thereof.  The benefit to be derived from the aforesaid purchase, if the purchase and onward sub-sale was successful, should be for the Group of which the Wong’s family was a major part including the 1^st respondent Mr Wong himself.  

39. I however do not accept the submission of the 1^st respondent.  For the aforesaid reasons, I believe that if China Star were to make any profit from the purchase and subsequent sale of the Building, it would be for the benefit of the bearer of the bearer shares certificate, i.e. the 1^st respondent and/or his wife.  

40. In any event, if the transfers could conceivably be said to be a “loan”, it was unsecured, and China Star was a shelf company, and did not have any independent assets of its own to enable it to repay such loan.  In addition, the option to purchase by the CAP Group created in or about late December 1997 or early January 1998, which was backdated to December 1997, failed to provide any adequate security for loans and was not in place at the time the funds were actually transferred.

41. In the end, the default by CA Fin and CA Sec has prevented some 9,500 clients from retrieving shares, which they thought they held with a total market value in the region of $1.4 billion.  From the work done by the Liquidators of CA Fin and CA Sec, it appears that there will be a substantial shortfall in the shares available to discharge the combined claims of their clients.

42. The China Star transaction which was not reported to SFC must have also violated the requirement that there should be no pooling or funding for lending to related parties unless collateralised by assets.

43. Further, there are other important incidents of misfeasance committed by the 1^st respondent including false accounting.  There was no proper accounting records maintained by CA Fin in relation to the China Star transfer and the accounting records failed to fairly reflect the true state of affairs of CA Fin in this regard.

44. The 1^st respondent was convicted on a charge of false accounting contrary to section 19(1)(a) of the Theft Ordinance which related to the back-dating of the CA Fin documentation relating to the China Star loan and the pretence that there was in fact documentation authorising the removal of monies from CA Fin.  By causing the false accounting, the 1^st respondent acted dishonestly and displayed the wants of commercial probity.  He was sentenced to two years’ imprisonment suspended for three years.  His appeal against conviction was dismissed by the Court of Appeal on 27 June 2002.

45. In conclusion I agree with the submission of the applicant, the Official Receiver, that the 1^st respondent is a menace to the industry of securities and finance.

The 1^st respondent

46. However, in the mitigation boldly put forward in writing by the 1^st respondent and in his oral submission, he just blamed it on “the bad and wrong-timing decision made by the Wong’s family on the purchase of an office building in Central”.  There was not a single word of regret or apology tendered for those poor clients who had lost most of their monies through this dishonest and extremely risky blunder created by the 1^st respondent.  I am sure if I accept this so-called mitigating factor, each of these thousands of customers and creditors of CA Fin and CA Sec must be feeling extremely aggrieved.  The seriousness of his conduct is aggrieved by this kind of unremorseful attitude of the 1^st respondent.  Apart from blaming on others including the crash of the Asian market, the collapse of Peregrine group and the property market in later part of 1997 and the beginning 1998, the 1^st respondent expressed no regret or apology to those poor creditors/customers of the CA Pacific Group at all.

The 2^nd and 3^rd respondents

47. In respect of the 2^nd respondent Madam Chu and the 3^rd respondent Mr Lo, as appointed directors of CA Fin, it was submitted by the Official Receiver that they had failed to take proper steps to ensure that its accounting records reflected the true state of affairs.  The main complaints of the Official Receiver against the 2^nd and 3^rd respondents was that they had conducted the affairs of CA Fin and CA Sec with disregard of the provisions of the Companies Ordinance and correct companies practice.  They have delegated their power and were not actively involved as directors on record of these two companies and have allowed the 1^st respondent to conduct himself in such a manner which substantially caused the insolvency of the two companies and created risk and detriment to their respective creditors and customers.

48. There were deficiencies in the accounting records of both CA Fin and CA Sec, which the 2^nd respondent together with the 3^rd respondent failed to remedy, leading to the risk of them not having accurate information of the company’s affairs and of being misleading to third parties, including auditors, regulatory authorities, creditors and ordinary investors.  This is particular serious in the case of a regulated industry where the interests of large numbers of the public are at stake.  The abdication of responsibility of the 2^nd and 3^rd respondents had allowed the 1^st respondent to cause CA Fin and CA Sec to trade at a risk and to the detriment of their creditors and customers.  

The 2^nd respondent

49. In respect of Madam Chu the 2^nd respondent, she adopted the first 10 paragraphs of the Grounds of Mitigation of the 1^st respondent.  She said she is now 73 years old and has been engaged in the securities and finance industry for over 50 years and has made considerable contribution to the development of the securities and finance industries.  After the liquidation of the C.A. Pacific Group companies, she has retired and has not taken up any office with any companies.  She has no intention of taking up any office of the companies in future either.  She also submitted as the 1^st respondent that the whole incident was caused by “the bad and wrong-timing decision made by my sons on the purchase of the office building in Central”.  However, like the 1^st respondent, she has not expressed any regret and apology to those poor customers and creditors of CA Fin and CA Sec for the loss of their monies.

The 3^rd respondent

50. In respect of the 3^rd respondent Mr Lo, he was willing to dispose of the proceedings by way of the shortened form of procedure sanctioned in the case of Re Carecarft Constructions Co. Ltd which is now known as a Carecraft disposal or procedure.  A “Statement of Facts Not In Dispute” has been agreed between the applicant and the 3^rd respondent for the purposes of Carecraft settlement.  In the mitigating factors put forward by him (which were not challenged or objected to by the Official Receiver, whilst not accepting the truth thereof either) Mr Lo wanted the court to take into account of the fact that his role was minor in comparison to the 1^st respondent’s repeated and serious breaches of duty.

51. He was never a shareholder of CA Fin or CA Sec and he was never remunerated for his directorship of these two companies either.  He was not dishonest and his breaches were not motivated by his personal gain.

52. He was asked by the 1^st respondent to be a director and he was told that it was temporary only.  He did not want it and regretted in accepting it and not resigning from it much earlier than he did, though he had raised the question of resignation of and replacement for him as a director from time to time unsuccessfully.  He expressed his regrets that he did not have the courage or foresight to resign earlier.  He felt ashamed that he stayed on and he considers that he must now share the blame for the downfall of the Group by his passive inactivity.

53. He pointed out that his wife was also a client of CA Sec and CA Fin and she herself had lost money as a result of the insolvency of the C.A. Pacific Group.  This I must say is some indication that he did not know the actual calamitous situation of the C.A.P. Group.  Ultimately he expressed that he is deeply sorry that so many individually clients have lost money in the collapse of the C.A. Group.  There were other mitigating factors put forward by Mr Lo in the aforesaid “Statement Of Facts Not In Dispute” and his long 2^nd affirmation filed on 27 November 2003.

Disqualification orders

54. I have reached the conclusion by accepting the submissions of the Official Receiver that the guidelines and broad tariffs for disqualification were set down by the English Court of Appeal in Re Sevenoaks Stationers (Retail) Ltd [1991] Ch. 164 which authority has been adopted and applied by the Court in Hong Kong.  The 15 years’ disqualification period is divided into three brackets, namely :

(1)	the top bracket of disqualification of over 10 years should be reserved for particularly serious cases;
(2)	the middle bracket of disqualification from 6 to 10 years should apply for serious cases which do not merit the top bracket; and
(3)	the minimum bracket of 2 to 5 years’ disqualification should be applied where, as disqualification is mandatory, the case is relatively not very serious.

55. I also accept the submission of the Official Receiver that with regard to the 1^st respondent the court should impose a disqualification order for a period within the highest bracket in Re Sevenoaks.  In respect of the 2^nd and 3^rd respondents, the Official Receiver submitted that although both of them are less culpable than the 1^st respondent, both of them have abdicated the duties in a manner inconsistent with the duties imposed upon directors.  The court was invited by the Official Receiver to impose a disqualification order in the Sevenoaks middle bracket in relation to the 2^nd respondent and in the lower bracket in relation to the 3^rd respondent.

56. By reasons of those matters mentioned hereinbefore, this court accordingly do make a disqualification order against each of the three respondents pursuant to section 168H(1) of the Companies Ordinance for the respective periods as follows :

(1)	In respect of the 1st respondent, a period from the effective date of this order, today, up to 31 December 2014.
	It is provided under section 168D(3) that
	“Where a disqualification order is made against a person who is already subject to such an order, the periods specified in those orders shall run concurrently.”
	The 1st respondent has already been sentenced in the Criminal Court for a disqualification order since 7 February 2000 for seven years.  My disqualification order up to 31 December 2014 shall run concurrently with such disqualification order made against him on 7 February 2000.  In effect, he is now under a disqualification period of nearly 14 years and 11 months from 7 February 2000 to 31 December 2014, which is the top bracket of the 15 years period stipulated under subsection (4) of section 168H.
(2)	In respect of the 2nd respondent, the disqualification order shall run from today until 31 December 2008, making disqualification period of a little bit more than five years.
(3)	In respect of the 3rd respondent, the disqualification order shall be up to 31 December 2006, making a period of about three years.

57. I should also point out that under rule 10 of the Companies (Disqualification of Directors) Proceeding Rules at p.K5 of the Ordinance, my order shall only take effect at the beginning of the 21^st day after the day on which the order is made.  This will be 27 December 2003 since Boxing Day is a holiday.  This will give a respondent some time to arrange his affairs.

58. Further I would also like announce in open court that, as a result of the 3^rd respondent’s application by way of summons in chambers for leave to continue to be a director and to be concerned with or take part in the management of three companies called Hui Kai Securities Ltd, Hui Kai Futures Ltd and Hui Kai Holdings Ltd, (“the three companies”), he is granted leave to continue to be a director and to be concerned with or take part in the management of the three companies notwithstanding the disqualification order made against him pursuant to section 168H(1) of the Companies Ordinance.  However the aforesaid leave was granted on the following conditions, namely :

(1)	The 3rd respondent, shall within seven days of the date of this order, notify in writing the SFC and the bankers and statutory auditors of the companies of the disqualification order and this order of granting him leave as aforesaid.
(2)	The statutory auditors of the companies shall be engaged until the 3rd respondent’s disqualification under the disqualification order is spent, to inspect and audit the books and records of the three companies on a quarterly rather than normal annual basis (I was informed that the 3rd respondent has been reporting to the SFC about the three companies on a monthly basis up till now); and
(3)	The SFC shall be invited to visit the companies on a quarterly basis, until the 3rd respondent’s disqualification under the disqualification order is spent, to interview staff including the 3rd respondent, inspect the books and records of the companies and carry out any other investigations so as to satisfy itself that the three companies are continuing to comply with their statutory obligations.

59. In respect of the costs of the Official Receiver’s open court application herein, the three respondents shall pay the costs of the Official Receiver for the application with a direction to the Taxing Master that the time spent in the open court hearing in respect of the 3^rd respondent was 20% and 40% each for the 1^st and 2^nd respondents.  The 3^rd respondent shall pay the costs of the Official Receiver for his own application in Chambers, to be taxed if not agreed.