EAGLE QUEEN CO LTD AND ANOTHER v. FIRST BANGKOK CITY FINANCE LTD

Nos 143 & 144 of 1988
(Civil)

Headnote

    The Appellants claimed against the official Receiver as liquidator of two companies repayment of a sum paid to the liquidator in abortive post liquidation dealings. The liquidator rejected the claim, and the Appellants sought relief as "persons aggrieved" under section 200(5) of the Companies Ordinance. Held:

(1) Complaint did not fall within section 200(5).

(2) Correct procedure was to proceed by writ.

BETWEEN

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J U D G M E N T

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Hunter, J.A.:

1. In 1984 the Court ordered the winding up of the respondents, First Bangkok City Finance Limited and Thai Merchantile Development Finance Limited, the Official Receiver being appointed liquidator in both cases. On 14th October 1988 the appellants Eagle Queen Company Limited and Hong Kong Macau Development Company Limited took out an identical summons in each liquidation under section 200(5) of the Companies Ordinance, Cap 32 seeking orders:

"(1)    reversing the decision of the Official Receiver and Liquidator to refuse to return the sum of HK$500,000 (or its value) paid to the official receiver and liquidator by means of Bangkok Bank cashier cheque number 060650 on 26th February 1988;

(2)    that the Official Receiver and Liquidator do repay the sum of HK$500,000 to either Eagle Queen Company Limited or Hong Kong Macau Development Company Limited;"

and other relief against the Official Receiver.

2. On 21st October Lee Tiong Hock, also known as Robert Lee, made an affirmation in support of the applications. It was then too late for this to he dealt with before 27th October when both summonses were returnable before Mayo J. On that date, "Mayo J accepted the validity of the Official Receiver's objections to the procedures adopted. He dismissed both summonses on the grounds first that the complaints could not properly be brought before the court under section 200(5) of the Ordinance : and secondly that the complaints should properly be the subject matter of an action begun by writ. He accordingly dismissed both summonses. From his decisions the appellants now appeal.

3. The full factual background is very intricate, but a brief summary suffices for present purposes. It would seem that in both liquidations claims have been made against a company called Creative Investment Limited (Creative). Creative is itself principally owned and controlled by six other companies. Six Thai Nationals, the owners of fifty per cent of the shares in those six companies, are presently restrained in proceedings brought against them by the respondents, by court order dated 10th July 1987, from dealing with such shares.

4. Other interested parties were desirous of purchasing the Creative shares held by the six companies. The negotiator for these purchasers was the affirmant Robert Lee. On the very limited evidence available it is impossible to reach any conclusion upon the true nature and extent of his mandate and upon his authority to bind any of the numerous parties named in his affirmation.

5. On 23rd February 1988, Ernst and Whinney acting for the liquidators, wrote to Mr Lee offering to accept a sum of HK$8.75m for a 32.8 per cent interest in the Creative Group from Mr Lee's "Principals". The intent was that the ultimate destination of this sum should, with the consent of all of the parties, abide the result of the proceedings above referred to. The letter went on:

"In addition, you have also agreed that a sum of HK$500,000 will be paid by Creative to the Official Receiver as Liquidator in respect of the costs of the liquidation.....

Finally, as evidence of good faith it is required that the payment of the HK$500,000 should be made to the Official Receiver within 36 hours of accepting this offer, i.e. by 12 noon on 26th February 1988?

Mr Lee purported thereafter to accept such offer and on 25th February caused HK$0.5m to be paid to the Official Receiver as "good faith money".

6. The Official Receiver asserts that on his side only one payment of HK$0.5m was ever considered or discussed, i.e. that mentioned in the letter quoted and that there was no question of that payment ever being refundable. This view appears to have the support of all the drafts of the agreements which thereafter came into existence.

7. Mr Lee on behalf of the appellants, and it would seem Creative also, disputes this. He asserts that two such Payments were envisaged : one by Creative in the terms of the letter which was never in fact paid: and one by he purchasers" which was. In relation to the latter payment he asserts that it was orally agreed on the telephone between himself and a Ms Hardwick, a solicitor in the Official Receiver department, that the same should be refundable. He does not deal with or seek to explain the final engrossment of the Creative agreement, which reflected amendments apparently requested by him, to show the actual payment to have made by the purchasers on behalf of Creative, and in terms that it was not refundable.

8. In the event it is said that one of the many parties declined to sign. On 2nd July Mr Lee in the name "the Purchaser" requested the Official Receiver to return the sum of HK$0.5m. On 6th July the said Ms Hardwick on behalf of the Official Receiver replied accepting what she regarded as a repudiation of the agreement and adding:

"There can obviously be no question of the HK$500,000 or any part thereof being returned".

9. In these circumstances it is clear that in order to determine whether this deposit is repayable by the Official Receiver to any party, and if so to whom, any tribunal would have to resolve a number of presently unresolved and in some cases seriously disputed questions of fact including, telephone calls, amendments to the draft agreements, the authority of Mr Lee actual or ostensible, whether he gave any implied warranty as to such authority, the relationships between the various purchasing parties, and the source or sources of funds.

10. In support of their summonses and of this appeal, the appellants argue that the letter of 6th July constituted "the decision of the Official Receiver and liquidator" referred to in paragraph 1 of their summonses: that this was "an act or decision" of the liquidator wihin section 200(5) of the Ordinance : and his rejection of the claim entitled them as "persons aggrieved" to apply to the court. I cannot agree. Read in its context and in the light of the helpful UK authorities upon the corresponding provision in the UK, and its fore-runner, section 80 of the Bankruptcy Act 1914, it seems to me that the court under this sub-section will interfere only in two categories of case.

11. First in the language of Harman J in Re A Debtor [1949] ch 236, 241:

"Administration in bankruptcy would he impossible if the trustee must answer at every step to the bankrupt for the exercise of his powers and discretions in the management and realization of the property".

To bring itself within this sub-section an applicant has to show exceptional behaviour e.g. that the liquidator "has not exercised his powers in good faith or has acted in a way in which no reasonable liquidator could have acted" Palmer Company Law 24th edition vol 1 Para 88-38, and in Re_-Peters, ex p Lloyd. 1882 47 LT, 64, 65 Per Jessel MR.

12. The second category arises when in the course of his administration the liquidator is called upon to give a ruling or to make a decision which directly affects a party rights. Examples of such decisions are conveniently collected in Halsbury Law of England 4th edition vol 7(2) paragraph 2035. They include such matters as decisions upon the voting rights of creditors or contributories and upon the admission and rejection of proofs It is significant that when considering and ruling upon such matters the liquidator must act even-handedly as an impartial neutral; Re Exchange Securities and Commodities Limited [1983] BCLC 186

13. In such circumstances the party against whom the liquidator decides may be a "Person aggrieved" within the meaning of the sub-section. In Ex parte Sidebotham 14 ChD 459, 465, James LJ said that these words:

"do not really mean a man who is disappointed of a benefit which he might have received if some other order had been made. A 'Person aggrieved' must be a man who has suffered a legal grievance, a man against whom a decision has been pronounced which has wrongfully deprived him of something, or wrongfully refused him something, or wrongfully affected his title to something".

This test was criticised as being unduly narrow by Lord Denning when giving the opinion of the Privy Council in Attorney General for Gambia v N'Jie [1961] AC 617, 634. He said that the words:

"Do include a person who has a genuine grievance because an order has been made which prejudicially affects his interests".

A similar thought was expressed by James LJ later in his judgment in Sidebotham, when he said:

"In the present case no one is prejudiced" by the conduct complained of "except insofar as he has lost any benefit that he might have obtained if an order had been made; there is nothing to embarrass him in any proceedings which he may wish to take against the trustee"

p 466.

14. This principle covers this case. The rejection of the claim in the letter of 6th July was not a decision by, the liquidator in the relevant sense at all. It was no part of his duty as an impartial neutral to purport' to decide the validity of a claim, made against him, and he did not do so. Further his rejection of the claim did not prejudice the applicants in any relevant sense. They are free to pursue without embarrassment such claims as they may think they have. I therefore agree with Kayo J upon his first ground of decision.

15. Equally, if we should both be wrong on the first ground, 'I would agree with his second ground. Ii is to my mind manifest that this dispute is one which can only properly and satisfatorily he resolved by litigation, and which calls for leave to proceed under section 186 of the Ordinance. I am content to adopt as precisely applicable this statement in Palmer's Company Law vol 1 paragraph 88-75:

"Liberty to proceed is often given where outsiders are involved in some dispute with company, and it is desirable that the dispute should be decided in an action by the ordinary tribunals".

16. I accordingly conclude that these appeals fail and must be dismissed.

Cons, V.-P.:

17. I agree with my Lord that the appeal should be dismissed. The crux of the matter, as 1 see it, is whether on a true construction of section 200( S ) of the Companies Ordinance Cap. 32, the Judge below was entitled to resolve The questions put to him by the summonses dated 14th October 1988. The subsection provides:-

"If any person is aggrieved by any act or decision of the liquidator, that person may apply to the Court, end the court may confirm, reverse, or modify the art or decision complained of and make such order in the premises as it thinks just."

18. Mr. Graham, for the Appellants, reminds us of the words of Section 1 of the Interpretation and General Clauses Ordinance Cap. I which require us to give the words of the subsection "such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the object of the Ordinance according to its true intent, meaning and spirit" In his submission the Appellants are clearly "persons aggrieved", being deprived go, the moment of $500,000 of what they consider to be their own money, and that this is the result of "the decision" of the Official Receiver given in his letter of the 6th July 1988.

19. I have some doubt whether in circumstances such as the present, where the provisions of the Hong Kong legislation have been taken directly from those in England, section 19 would entitle this Court to reject a construction already placed upon them there: see De Lasala v. De Lasala [1960] A.C. 564 at 558C. But were I so able, I would still feel bound, in seeking the true intent; meaning and spirit of the subsection, to have regard to the context in which it is to be found.

20. The marginal note to section 200 reads "Exercise and control of liquidator powers". I accept that a marginal note is not to be used as an aid to the construction of section itself, but in this instance the note seems to me accurately to reflect the object of the section. The powers of a liquidator are set out in Section 199 of the Ordinance. Then Section 200(1) requires him, in the exercise of those powers in the administration of the assets of the company in liquidation, to have regard to the directions of the creditors and contributors in general meeting, or to the committee of inspection. Subsection (2) provides how he say obtain such directions. Subsection (3) allows him to apply to the court, otherwise he is to use his own discretion (Subsection (4)) Which, by subsection (5), is subject to the supervision of the Court. But the summonses of the 14th October do not ask the Count to supervise the way in which the liquidator has exercised any power given to him by statute. They ask the Court instead to establish the true facts, and thereafter the legal consequences, of a transaction to which the liquidator was himself a party. In my view that does not fall within the subsections.

21. In coming to this conclusion, I do not overlook Leon v. York-O-Matic Limited [1966] I W.L.R. 1450 or Re Wyvern Developments Ltd. [1974] I W.L.R. 1097 which may appear to give some support for a wider interpretation. But it has to be observed that in those cases the question was whether what the liquidator had done was right or wrong, in the instant case the first question at least is what has he done. 1n my view the summary procedure introduced by the subsection is neither apt; nor was intended, to provide a forum for the resolution of questions of that kind.

Macdougall, J.A.:

22. In my view resort to section 200(5) of the Companies Ordinance is not appropriate for the resolution of a dispute such as the one with which this appeal is concerned.

23. Relief may properly be sought under the sub-section, only where it involves supervision by the court of the exercise of a power conferred on the liquidator by statute not the determination of a dispute to which the liquidator is a party.

24. Moreover, it seems to me that proceedines by way of summons are wholly inappropriate and that the only effective method of dealing with this matter is by way of an action.

25. I am therefore of the opinion that Mayo J. was correct in dismissing the summonses. I would dismiss these appeals.

26. These appeals accordingly stand dismissed, and we make an order nisi that the Appellants pay the Respondents costs thereof.