MAX SHARE LTD AND ANOTHER v. NG YAT CHI

IN THE COURT OF FINAL APPEAL

HONG KONG

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Application for Leave to Appeal
FAMV No. 1 of 1997

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DETERMINATION

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Chief Justice Li:

1. This is the determination of the Appeal Committee.

The Petition and the striking out

2. On 10 June 1996, the petitioners Mr Ng Yat Chi ("Mr Ng") and Mr Choy Bing-wing ("Mr Choy") presented a petition for the winding-up of Max Share Ltd ("the Company") on the just and equitable ground alternatively for an order under s 168A of the Companies Ordinance, Cap. 32, requiring the majority shareholder, China Resources (Holdings) Ltd ("China Resources") to purchase their shares in the Company.

3. The Company and China Resources applied to strike out the petition on the ground that neither petitioner had the necessary standing to present the petition. On 3 December 1996, Mr Justice Rogers acceded to the application, accepting that neither petitioner had standing, and struck out the petition in its entirety.

4. The petitioners then appealed to the Court of Appeal. That Court took the view that although Mr Choy did not have standing to petition, Mr Ng did. Accordingly, by its judgment handed down on 28 May 1997, the Court of Appeal, while dismissing Mr Choy's appeal, allowed Mr Ng's appeal.

5. Following that, the Company and China Resources applied to the Court of Appeal for leave to appeal to appeal to the Privy Council in order to challenge the Court of Appeal's decision that Mr Ng had standing to petition. On 24 June 1997, the Court of Appeal refused such leave.

The applications

6. There are two application before us. First, by motion filed on 22 July 1997, the Company and China Resources ("the applicants") have applied to us for leave to appeal to the Court of Final Appeal against the Court of Appeal decision that Mr Ng had standing to petition. Secondly, by summons filed on 22 September 1997, Mr Ng applied for an Order that the motion for leave to appeal be dismissed.

The Background

7. Mr Ng is an undischarged bankrupt. On 3 February 1997 a creditor not concerned in the proceedings before us obtained a money judgment against him. He failed to satisfy it. The judgment creditor issued a bankruptcy notice. He still failed to pay. On 19 June 1992 a bankruptcy petition was issued against him followed by a receiving order on 29 July 1992. On 17 August 1992 his creditors resolved that he should be adjudication bankrupt. On 28 August 1992 an adjudication order was made. The Official Receiver was the receiver and is the trustee in bankruptcy.

8. Mr Ng was at all material times and still is on the register as the holder of 98,000 shares in the Company ("the shares"). He became indebted to Mr Choy and Charged the shares to him at a time before the creditor obtained his judgment against Mr Ng.

9. Mr Choy obtained (i) on 9 April 1992 a charging order absolute over the shares and (ii) on 28 July 1992 an order that the shares should be sold by public auction. At the auction on 10 August 1992, Mr Choy acquired the share. The bought and sold notes and the transfer form were executed by the Official Receiver as "Official Receiver and Trustee" and bear the date 25 August 1992.

10. On 21 August 1992 Mr Choy had instituted proceedings against the Company to have the shares registered in his own name. But he was unsuccessful. On 9 December 1992, the Official Receiver applied to the Company to have the shares registered in his own name. But this application was refused.

11. On 28 January 1993, the Official Receiver wrote a letter ("the letter of 28 January 1993") which reads:

"Thank you for your letter of 27 January.

I do not consider that I am the legal owner of the shares. I hereby disclaim any interest that I may have in them in accordance with Section 59 of the Bankruptcy Ordinance.

The only person entitled to vote the shares is the bankrupt..."

12. According to the judgment of the Court of Appeal, that letter was written to solicitors of the Company. At the hearing before us, this letter was not before us. But subsequently, Mr Choy sent in a bundle of correspondence which ended with the letter. (Copies were sent to the other parties.) We have considered this bundle in reaching our determination. The letter was addressed to Messrs Iu Lai Li. From our reading of the bundle, it appears that firm were solicitors for Mr Choy.

The Court of Appeal's judgment

The Court of Appeal held that:

(a) Prior to the letter of 28 January 1993, Mr Ng as the registered shareholder was entitled to petition notwithstanding his bankruptcy. This is not challenged by Mr Winston Poon SC appearing for the applicants before us.

(b) At the time of the letter of 28 January 1993, there was nothing to disclaim and the letter was ineffective. As a result of the sale, Mr Choy as purchaser was given the fullest right that Mr Ng, the bankrupt, and the trustee could give and the trustee had divested himself of the legal interest in the shares. So by the time of the letter, there was nothing to disclaim. The Court of Appeal regarded the registration on the register of members as no more than evidence of legal ownership but not as conferring legal ownership.

(c) Having regard to (b), the Court of Appeal found it unnecessary to address the issue of the effect upon Mr Ng's right to present the petition if the letter of 28 January 1993 was a disclaimer.

Section 22(1)(b)

13. The judgment of the Court of Appeal was interlocutory. Section 22(1)(b) of the Hong Kong Court of Final Appeal Ordinance ("the Ordinance") provides that an appeal shall lie to the Court:

"at the discretion of the Court of Appeal or the Court, ... if, in the opinion of the Court of Appeal or the Court, as the case may be, the question involved in the appeal is one which, by reason of its great general or public importance, or otherwise, ought to be submitted to the Court for decision."

Mr Ng's summons

14. We should first deal with Mr Ng's summons filed on 22 September 1997 seeking dismissal of the motion for leave to appeal. It in effect attempts a pre-emptive strike. The grounds relied on are want of jurisdiction of the Court or that the motion discloses no reasonable grounds for leave to appeal, is frivolous or fails to comply with rule 79(2) of the Hong Kong Court of Final Appeal Rules ("the Rules"). Mr Ng had earlier applied for a summons to be issued by the Registrar calling upon the applicants to show cause before the Appeal Committee why their application for leave to appeal should not be dismissed. Mr Winston Poon SC who did not appear before the Registrar on 1 September 1997 on that application informed us on instructions that the Registrar dismissed it but indicated that Mr Ng was not shut out from pursuing it before the Appeal Committee. Following that, Mr Ng issued the present summons.

Jurisdiction of the Court

15. After the Court of Appeal refused leave to appeal to the Privy Council on 24 June 1997, the applicants did not apply to the Privy Council for leave. Mr Ng submits that in such circumstances, the Court has no jurisdiction to entertain any appeal. Mr Ng relies on provisions such as s 49 of the Ordinance and rule 79 of the Rules.

16. In our judgment, the Court does have the jurisdiction to entertain this application for leave to appeal and, if leave is granted, the appeal. The provisions relied on are transitional provisions dealing with entirely different situations; where the applicant has obtained leave to appeal to the Privy Council and the appeal has not been finally disposed of or where the applicant has applied for leave to appeal to the Privy Council but the application has not been disposed of. In these situations, the matter will proceed in the Court which can given appropriate directions.

17. In a case such as the present, the Court's jurisdiction is governed by s 22(1)(b) and the application for leave is dealt with by s 24(3). These provisions clearly confer jurisdiction. We are satisfied that the reference to the Court of Appeal in these provisions is to the Court of Appeal both before and after 1 July 1997. It suffices to note that nowhere in the Ordinance is the term Court of Appeal qualified by references to the period before or after that date. That is so even where the reference must be to the Court of Appeal before that date (as in s 49 since there could be no question of leave to appeal to Privy Council after that date) or where the reference must be to the Court of Appeal after that date (as in s 32(1) since before that date the Court of Appeal could not have been involved in granting certificates of the kind envisaged in that provision).

18. Section 22(1)(b) (the relevant part of which has been set out above) provides that an appeal to the Court lies at the discretion of the Court of Appeal or the Court on the criteria laid down. Section 24(3) provides that if an application for leave is refused by the Court of Appeal, an application may be made to the Court for leave. (Under s 18, the Appeal Committee exercises the power of the Court in this regard). This is what has happened here. There is no qualification, express or implied, that the Court could entertain an application for leave only where leave to appeal had been refused by the Court of Appeal after 30 June 1997 or only where an application for leave had been lodged in the Privy Council before 1 July 1997.

Other grounds in Mr Ng's summons

19. Apart from the jurisdiction argument, Mr Ng relies on the grounds that (i) the motion discloses no reasonable grounds for leave to appeal or (ii) it is frivolous and/or (iii) it fails to comply with rule 79(2) of the Rules.

20. As to (iii), rule 79(2) provides that where a person has applied for leave to the Privy Council but the application has not been determined, the applicant may apply to the Court for directions. As we have pointed out, this is a transitional provision dealing with a different situation from that we have here. It does not affect the Court's jurisdiction in a case such as the present where no such application had been made to the Privy Council in the very short period before 1 July 1997 after the Court of Appeal refused leave on 24 June 1997.

21. As to (i) and (ii), we have considered the materials relied on including the affirmation of Li Ngan Shui Brumen filed on 14 August 1997. In our judgment, the grounds in (i) and (ii) are not made out.

22. Accordingly, we dismiss Mr Ng's summons.

The application for leave appeal

Mr Winston Poon SC for the applicants submits in support of the application for leave that the question involved in the appeal is one, which by reason of its great general or public importance ought to be submitted to the Court for decision; namely, whether as a matter of law registration of the name of a person on a register of members of a company confers on him legal ownership in respect of his shares in that company or merely serves as evidence of his legal title in such shares.

23. We agree. This question has implications in company law and we accept that it is one which by reason of its great general and public importance ought to be submitted to the Court for decision. Accordingly, we give leave to appeal. Such leave is conditional upon the applicants providing security within s 25(2)(a) of the Ordinance for $300,000 within 1 month from today.

24. The rules lay down a timetable for various steps for the prosecution of the appeal. This should be observed so that delay is avoided.

25. We would note that on the appeal, apart from the issue decided by the Court of Appeal that there was nothing to disclaim, the parties would have to address various issues. These include (and we emphasize that these are not intended to be to be exhaustive) the following : Whether the Court of Appeal ruled that prior to the letter of 28 January 1993, the trustee himself (separately from the bankrupt) had the right to petition under s 179 of the Companies Ordinance. In other words did they hold that the bankrupt or the trustee could petition and if so, is this challenged? This may well have an impact on other issues. Whether fully paid shares registered in the name of the bankrupt could be the subject matter of any disclaimer at all within s 59(1) of the Bankruptcy Ordinance, especially where they have been sold. We do not know whether this question was raised below but it should be dealt with on the appeal. Whether the letter of 28 January 1993 to Messrs Iu Lai Li action for Mr Choy (and not the company) could be effective as a should be dealt with on the appeal. What was the effect upon Mr Ng's right to petition if the letter of 28 January 1993 was a disclaimer, a question which the Court of Appeal found it unnecessary to deal with.

26. Further, we would note that the bundle of correspondence sent in by Mr Choy after the hearing before the Appeal Committee should be before the Court on the appeal. The parties should consider whether there are further letters which are relevant: for example letter to which reference is made in letters in the bundle and later letters such as the letter of 7 October 1996 from the Official Receiver's Office to solicitors for the applicants reference to in the judgment of Mr Justice Rogers (p.4).

Representation

27. Mr A Chan of the Official Receiver's Office made clear to us that he was appearing before us on the petition to wind up the Company. He took a neutral position.

28. We urge the Official Receiver to instruct Senior Counsel to prepare and submit a written Case and to appear on the appeal. Before us and in the courts below only the applicants were represented by counsel. If this remains the position on the appeal, this would be unfortunate as the Court should have the benefit of the fullest arguments. Mr Chan pointed out that are no assets in the bankrupt's estate. However, the Official Receiver should have regard to wider considerations of public interest. As we have held, a question of great general and public importance is involved. Further questions relevant to the Official Receiver's work relating to the right to petition for winding up where the registered shareholder is bankrupt and relating to disclaimer in bankruptcy will arise.

Costs

29. Mr Ng has failed in his commons before the Registrar (the costs of which were reserved) and his summons before us. But the matters relied on were in effect raised in opposition to the application for leave to appeal. For that reason we would treat the costs on these summonses in the same way as the application for leave. In our Judgment, the costs of both summonses and the application for leave should be costs in the appeal.