WANG CHIEN CHIH also known as Mickey Wang v. THE REGISTRAR OF COMPANIES

HCMP 1382/2018

[2018] HKCFI 2717

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1382 OF 2018

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REASONS FOR DECISION

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1.  This is an application by Wang Chien-Chih, (the “Applicant”), pursuant to sections 765(1) and 765(4) of the Companies Ordinance, Cap 622 (“the Ordinance”), to have Win Land Estate Limited (旺星地產有限公司) (Company No 347295) (the “Company”) restored to the Companies Register.

2.  The Originating Summons was taken out on 31 August 2018.  The Registrar of Companies takes a neutral stance to this application.  In the event that the court is minded to grant the relief pursuant to the Originating Summons, the Registrar would seek to include the following terms in the order to be made:

 (1)     The company, namely, “WIN LAND ESTATE LIMITED (旺星地產有限公司)” (Company No 347295) be restored to the Companies Register pursuant to section 767(1) of the Companies Ordinance, Cap 622;

 (2)     The Applicant shall deliver to the Registrar of Companies, the respondent, for registration an office copy of the court order to be made herein (the “Order”) within 7 days from the date of the Order;

 (3)     The Applicant shall cause the Company to comply with section 770 of the Ordinance relating to the change of prohibited name;

 (4)     The Applicant shall cause the Company to comply with section 771 of the Ordinance relating to the change of same or similar name; and

 (5)     The applicant shall pay the costs of the Registrar of Companies,the respondent, in the sum of HK$5,000.00 within 3 days from the date of the Order being the agreed costs and disbursements in lieu of taxation.

MATERIAL FACTS

3.  The Company was incorporated in accordance with the laws of Hong Kong on 10 March 1992.  On 8 April 1992, the Applicant became one of the directors and a 30% shareholder of the Company prior to its dissolution by being struck off the Companies Registrar on 8 October 2004.

4.  The other shareholders were, and still are, Newtower Development Limited (now in liquidation) (“NDL”) and Chang Roa‑long, also known as Lanly Chang (“CRL”), who respectively held 4,000 and 3,000 of the 10,000 shares. The Company had four directors prior to its dissolution.  The other three directors were Dong Zhihuang (“DZH”), CRL and Huang Xungeng (“HXG”).

5.  From 1992 to 2008, it is alleged that the Applicant had left the routine operation of the Company in Hong Kong to the other three directors and he concentrated in managing the Company’s business affairs in Mainland China, mainly, the affairs of its subsidiary in Wuhan.  He said that he did not know that DZH and HXG had purportedly resigned from theirdirectorship in August 1993 and November 2000 respectively.  Further, the Applicant had not heard from the remaining director, CRL, since 1992.

6.  I have to say that I find this surprising because it was the Applicant’s duty as a director of the Company to prepare annual financial statements of the Company.  Mr Ma for the Applicant confirmed to the court that in fact no financial statements were prepared and no annual general meetings were held by the Company from 1992 to 2008.  As a director of the Company, the Applicant has already breached his statutory duties in failing to hold annual general meetings and tabling annual financial statements for approval.  It is not right to have a company incorporated in Hong Kong and then leave it unattended.  Even if the Applicant did rely on his fellow directors to attend to the operation of the Company, he still had an independent duty to supervise and make sure that his own statutory duties had been discharged.  I do not see how the Applicant can satisfy himself that the Company had complied with its statutory obligations if he had not heard from CRL since 1992, the very year the Company was incorporated.

7.  In fact, one day before the hearing, the court received a fax from CRL which expressed his surprise that there was a hearing scheduled at 9:30 am on 11 December 2018.  The court then directed CRL to state his position in relation to this application and to attend and/or send a representative to attend this hearing.  CRL did not attend the court hearing.  At the hearing, Mr Ma for the Applicant produced an email dated 9 October 2018 from CRL’s Taiwan lawyers which stated, inter alia, that:

“… …王健之欺我二十年至今均避不見面，本人在2018年2月得知其在中國偽造本人簽名，盜取本人名下財產，經本人追查數月，方知公司交其經營後未依規定申報年審，於2004年已被香港註冊處處長除名在案。… … 三、煩請大律師全權代表本人全力協助王健之「恢復公司」乙事… …”

8.  Further, in July 2008, the Applicant found out about the purported resignations of DZH and HXG and that the Company had moved from its original registered address to another unit within the same building in 1998 and of course, significantly, as a result of the Company’s failure to comply with the filing requirement for several years, it was struck off the Companies Register on 8 October 2004.

9.  However, instead of applying to restore the Company in 2008, it is alleged that on the advice of an unknown accountant, the Applicant proceeded to incorporate a new company by the same name, i.e., Win Land Estate Limited (the “New Company”) on 14 October 2008.  The New Company was assigned the company number of 1279207, a number which is different from that of the Company.  On 9 November 2011, the New Company changed its name to Win Nano International Limited.

10.  It is alleged that the Applicant was under the impression which turned out to be wrong that by incorporating the New Company with the same name, the assets of the Company would be transferred to the New Company automatically.  I have not seen any advice from any accountant to that effect.  I do not even know whether such advice existed or not.  I find it somewhat odd that the unknown accountant could have given such a wrong legal advice and the Applicant actually acted upon it.

11.  What actually prompted this application is that the Company’s wholly owned Wuhan subsidiary (the “Wuhan Subsidiary”) still owns certain pieces of land in Wuhan (the “Land”).  Between 1993 and 1997, the Wuhan Subsidiary developed the Land, incurring costs (of approximately RMB 70 million by 1998) which the Applicant said he contributed solely as the legal representative of the Wuhan Subsidiary.

12.  In 2003, the Wuhan City Planning Bureau authorised the Wuhan Subsidiary to further redevelop the Land with an additional gross floor area of 24,000 square meters by building an 18-storey block of commercial and residential units.  Recently, the Wuhan City Planning Bureau also authorized the Wuhan Subsidiary to develop further on another area within the Land.

13.  The Applicant then had proceeded to register the New Company as the shareholder of the Wuhan Subsidiary.  It is said that upon clarification with the Wuhan Administration for Industry and Commerce, the Company is now re-registered as the shareholder of the Wuhan Subsidiary rather than the New Company, with the original management reinstated. 

14.  It is the Applicant’s evidence that these latest changes were the result of his clarification with the Wuhan Administration for Industry and Commerce after obtaining proper legal advice.  No explanation was given as to why legal advice was obtained again at that stage.

15.  But, it is now said that if the Company is not restored, the Wuhan Subsidiary runs the risk of being deregistered by the Wuhan Administration for Industry and Commerce which may in turn affect the Company’s indirect interest in the Land via the Wuhan Subsidiary.

16.  As stated above, the Company has not produced any audited financial statements, but this court is being told that save and except the Wuhan Subsidiary and a sum of HK$15,124.78 currently held by the Government of the Hong Kong Special Administrative Region as bona vacantia, the Company has no other assets or immovable property.

17.  In order to obtain written consent from all directors and shareholders of the Company to this application, the Applicant has instructed his solicitors, Messrs Sun Lawyers LLP to issue letters to the following parties:

 (1) CRL;

 (2) NDL;

 (3) HXG;

 (4) Wong Wai Dai (“Wong”), a director and shareholder of NDL; and

 (5) Wing Shan Offshore Limited (“Wing Shan”), a director of NDL.

18.  In the said letters it is stated, inter alia, that “[I]f we do not hear from you by then, we shall consider that you do not consent to the Application.”  None of the recipients of the said letters replied.  Hence, the Registrar of Companies rightly observed that as none of the recipients signed and returned their consent letters, they are deemed not to have consented to this application.

Applicable Legal Principles

19.  Sections 765(1) and (4) of the Ordinance provide:

“ (1) Where a company’s name or a company has been struck off the register under Section 291 or 291A of the predecessor Ordinance, and the company is dissolved under that section,an application to the Court for the restoration of the companyto the Companies Register may be made by a person who–

(a) was a director or member or creditor of the company; and

(b) feels aggrieved by the striking off.

(4) An application to the Court for the restoration of the company to the Companies Register may be made –

(a) by a person who was a director or member or creditor of the company; or

(b)   by any other person, including the Government, who appears to the Court to have an interest in the matter.”

20.  Section 766(1) of the Ordinance provides:

“ Subject to subsections (2) and (4) –

(a) an application under Section 765(1) must be made within 20 years after the date on which the notice was published in the Gazette under Section 291(6), or on which the order was made under Section 291A(1), of the predecessor Ordinance;

(b) an application under Section 765(2) must be made within 20 years of the deregistration; and

(c) an application under Section 765(4) must be made within 20 years after the date of the dissolution.”

21.  Sections 767(1) and (3) of the Ordinance provide:

“ (1) The Court may grant an application made under Section 765(1) if satisfied that–

(a) the company was, at the time the company’s name or the company was struck off, in operation or carrying on business; or

(b) it is otherwise just that the company be restored to the Companies Register.

(3) The Court may grant an application made under Section 756(4) if satisfied that–

(a) in the case of a company whose name has been struck off the Companies Register–

(i) the company was, at the time its name was struck off, in operation or carrying on business; or

(ii) it is otherwise just that the company be restored to the Companies Register; or

(b) in the case of a company that has been deregistered–

(i) any of the requirements specified in Section 750(2)(a), (b), (c), (d) or (e) was not met; or

(ii)   it is otherwise just that the company be restored to the Companies Register.”

22.  In Eastwin Properties Ltd & Anor v Registrar of Companies & Ors (No 2) [2004] 4 HKC 547 at 552G, Tang J (as he then was) said:

“ 22. I should say that the parties agreed that the correct test for me to apply is whether or not the Company has more than a shadowy prospect of establishing anything of value, following the dictum of Hoffmann LJ (as he then was) in Re Forte’s (Manufacuring) Ltd; sub nom Stanhope Pension Trust Ltd v Registrar of Companies [1994] BCC 84.”

ANALYSIS

23.  I am of the view that the Applicant was a member and a director of the Company, hence he has the relevant locus standi to make this application. The application is also made within the 20 years period.  The real question is whether it is just in the circumstances of the present case that the Company be restored to the Companies Register.

24.  First, Mr Ma for the Applicant submitted that the Applicant, being preoccupied with the business operation of the Company’s wholly‑owned subsidiary, the Wuhan Subsidiary, and using his own resources to inject capital into the Wuhan Subsidiary, during the period when the striking off occurred is a person who feels aggrieved by the striking off within the meaning of section 765(1) of the Ordinance.  The Applicant might well have felt aggrieved by the striking off, but I am of the view that there were no legitimate reasons for the Applicant to allow the Company to be struck off.  The Applicant is the author of his own misfortune.  His failures to discharge his statutory duties are inexcusable.  His preoccupation with the business operation of the Wuhan Subsidiary was not a good reason for ignoring to attend to his statutory duties as a director of the Company from 1992 to 2008.  This court distinctly disapproves such behaviour.

25.  Secondly, it was submitted that the Applicant was wrongly advised to incorporate the New Company.  As stated above, this court has not been shown any written advice by the unknown accountant.  It is not up to an accountant to give legal advice in any event.

26.  It is the Applicant’s evidence that he was under the wrong impression that the incorporation of the New Company followed by a change of the New Company’s name would make the Company compliant with conditions imposed by the PRC authorities.  Accordingly, the Applicant changed the corporate information of the Wuhan Subsidiary in July 2017 which resulted in a need for the Applicant to clarify with the Wuhan Administration for Industry and Commerce as to what had happened to the Company.

27.  I am of the view that wrong legal advice is not a legitimate reason for his failure to apply to restore the Company for 10 years.  If the Applicant feels aggrieved, the remedy lies somewhere else.  The duty rests squarely on the Applicant to seek proper legal advice. It is somewhat surprising that the Applicant as a seasoned businessman could have been under the impression that by incorporating the New Company, the assets of the Company would have transferred to the New Company by the mere act of incorporation.

28.  However, Mr Ma for the Plaintiff forcefully submitted that it is highly likely that the Company’s dissolution would be treated as a fundamental non‑compliance with the conditions of approval as imposed by the PRC authorities and the Wuhan Subsidiary would be de-registered in the Mainland with the relevant approvals and contracts invalidated.

29.  The de-registration of the Wuhan Subsidiary will inevitably cause substantial loss to the investments on the redevelopment of the land project in Wuhan at US$5 million with US$2.5 million paid up front by the Company.  

30.  On the facts of the present case, it is clear that the Company has more than a shadowy prospect of establishing anything of value.  Therefore, most reluctantly, I make an order to restore the Company to the Companies Registry although I find it most unsatisfactory that the Applicant and the Company’s directors had allowed the Company to be struck off the Companies Register which was the result of serious dereliction of duties by the directors of the Company.  Also, the incorporation of the New Company was a very wrong move.

31.  As to the consent from other shareholders, as I set out in Re Man Fung Land Investment Company Limited HCMP 2490/2017, unreported, 4 October 2018 at paragraph 22, there is no strict legal or formal requirement that consent from all shareholders of the company to be ‘reactivated’ must be obtained before such ‘reactivation’. In any event, it is to the benefit of all shareholders and directors that the Company be restored to the Companies Registry.  CRL also appears to have consented to the application.

Disposition  

32.  For the reasons stated above and subject to an undertaking from the Applicant that he, qua director, will personally see to it that the Company do comply with its statutory duties and rectify its former breaches of such duties, I make the following orders:

(1) The company, namely, WIN LAND ESTATE LIMITED (旺星地產有限公司) (Company No 347295), be restored to the Companies Register pursuant to section 767(1) of the Companies Ordinance, Cap 622;

(2) The Applicant shall deliver to the Registrar of Companies, the respondent, for registration an office copy of this Order within 7 days from the date of this Order;

(3) The Applicant shall cause the Company to comply with section 770 of the Ordinance relating to the change of prohibited name;

(4) The Applicant shall cause the Company to comply with section 771 of the Ordinance relating to the change of same or similar name; and

(5) The Applicant shall pay the costs of the Registrar of Companies,the respondent, in the sum of HK$5,000 within 3 days from the date of this Order being the agreed costs and disbursements in lieu of taxation.

33.  Finally, it remains for me to thank Mr Ma for his helpful assistance rendered to this court.