EASEWIN PROPERTIES LTD AND ANOTHER v. THE REGISTRAR OF COMPANIES AND OTHERS

HCMP92/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.92 OF 2004

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REASONS FOR DECISION

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1. Easewin Properties Limited ("the 1st applicant") has a paid up capital of $10,000 divided into 10,000 shares of $1 each.

2. The 2nd applicant holds 2,900 shares in the 1st applicant. His wife Dong Jin who supports this application holds 3,100 shares.

3. The 2nd and 3rd respondents are owners of the other 4,000 shares.

4. On 7 January 2004, the 1st applicant was dissolved under section 291(6) of the Companies Ordinance.

5. This application is made under section 291(7) of the Companies Ordinance under which the court may : "if satisfied that the company was at the time of the striking off carrying on business or in operation, or otherwise that it is just that the company be restored to the register, order the name of the company to be restored to the register."

6. The application is supported by an affirmation of the 2nd respondent dated 12 January 2004. In paragraph 5 of the affirmation it is said that the company commenced to carry on business and that it continued to carry on business until January 2001 when the company was struck off.

7. In paragraph 8 of the affirmation it is said :

"In 1994, the Company was one of a joint venture real estate company, namely Chengdu Sing Kong City Real Estate Co. Ltd. (成都新港城置業有限公司)(hereinafter referred to as 'Sing Kong City') which was allowed to be incorporated in China PRC in 1st February 1994, with initial registered capital of RMB18,000,000.00. In April 1994, the registered capital of Sing Kong City was increased to RMB30,000,000.00, which the Company had fully paid up its share of RMB15,900,000.00, which is 53% of the total increased registered capital. I was thereof appointed as the chairman of the board of directors of Sing Kong City until I was submitted by Wu Yongjia in September 1996. It is now produced and shown to me marked 'WJC-5' and 'WJC-6' respectively are the copies of a Certificate of Approval for establishment of Sing Kong City and a registered capital pay up report in Chinese prepared by an auditing firm in Chengdu PRC."

8. This is the respondents' application under Order 24, rules 10 and 11(a) for an order that : "the 1st and 2nd Applicants do produce the originals of all documentary records relating to the payment of the shares of RMB15,900,000.00, including all remittance forms, board resolutions and receipts for the inspection of the 2nd and 3rd Respondents and their solicitors within 7 days from the date of the Order to be made herein".

9. The power to order production is discretionary and under Order 24, rule 13 no order should be made :

"... unless the Court is of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs."

10. No affirmation in opposition has yet been filed on their merits by the respondents. After it's filed one might be in the better position to decide whether the order is necessary in the Order 24, rule 13 sense.

11. Now on the material before me, it seems that the company is or at one time was the registrared owner of 53% of the shares in a Mainland company, Chengdu Sing Kong City Real Estate Co. Ltd ("Sing Kong City"). Sing Kong City appears to be a company with substantial assets.

12. It also appears that the 2nd and 3rd respondents are the shareholders and directors of Capital Century Company Limited ("Capital Century") which was or is a substantial shareholder in Sing Kong City. There is thus a potential conflict of interest between the 2nd and 3rd respondents and the company.

13. However, the respondents' case is that the company had not paid for their shares in Sing Kong City either legally or at all. Mr Andrew P.C. Lam who appears for the 2nd and 3rd respondents has submitted that as a result of such non-payment the allotment of shares by Sing Kong City to the company was void ab initio. Whether that is so or not must depend on Mainland laws.

14. Mr Lam has argued that for the purpose of the section 291(7) application it is necessary to decide (1) whether the company was carrying on business at the time its name was struck off; and (2) whether the company had paid fully and/or legally for its 33% of the shares in Sing Kong City. I am not persuaded and certainly not before I have seen the respondents' affirmation that :

(1) is essential to the application although it is relied on as a ground for relief;

(2) is truly relevant or necessary for the fair disposal of this application.

15. Furthermore, I do not believe that the application comes within Order 24, rule 10 because I do not believe that the documents had been alluded to in paragraph 8 of the affirmation.

16. Mr Lam had referred me to a decision of Deputy Judge McCoy in Zida Technologies Limited v. Tiga Technologies Limited and others, HCA5617/2000, the judgment of which was delivered on 8 October 2001. I do not think that case help Mr Lam at all. In paragraph 36 of the judgment, Deputy Judge McCoy said :

"Documents need not be identified or individually described - a general reference will suffice, as this is a compendious way of referring to a number of documents : Smith v. Harris (1883) 48 LT 869, 870 per Chitty J approved in Dubai Bank Ltd v. Galadari (No.2) [1990] 1 WLR 731, at 738C (CA) per Slade LJ. But a direct allusion to the document is required; where a document is not specifically mentioned its existence is prohibited from being inferred. In the present case the documents sought were clearly ones to which actual reference was made." (emphasis added)

17. Here, no actual reference was made to the documents the discovery of which now are sought by the respondents. Nor were they alluded to. So for that reason I would refuse this application.

18. Furthermore, in the exercise of my discretion I would also refuse the application. I believe it would be undesirable for this application to be turned into a trial of whether the company had paid or legally paid for its shares in Sing Kong City. Nor a determination of the consequence of either non-payment or illegal payment.

19. Rather in this application, the court should consider whether in the circumstances it is just to reinstate the company.

20. As I see it, the applicants' case is that the company has assets in the Mainland which it wishes to protect. Whether the company indeed has such assets in the Mainland must depend on Mainland laws. Unless the company is reinstated, no action can be taken in the Mainland to protect the interests of the company. On this narrow ground, the court can determine whether an order under section 291(7) should be made. It is undesirable and unnecessary to allow the parties to turn this application into a trial of whether the company had indeed paid for its shares in the Mainland and, if not, what is the consequence.

21. The respondents may be able to show by its affirmation in opposition that there are other issues which are required to be determined in this application. I say nothing on that but at least for the time being, I do not regard the documents sought as being necessary for the fair disposal of the true issue in this application, namely, whether it is just to order that the name of the company be restored to the register.