CHEUNG KOON PING v. MUNEYOSHI MICHIYOSHI

HEADNOTE

EXECUTION - charging order on shares in a private company - not enforceable by sale - section 21D of Supreme Court Ordinance, though derived from rule dealing solely with execution by writ of fieri facias, applies to all modes of execution.

PRACTICE - jurisdiction of District Court - order made without jurisdiction - whether Court should review or merely grant leave to appeal.

IN THE DISTRICT COURT OF HONG KONG

MISCELLANEOUS PROCEEDINGS

M.P. NO. 307 OF 1989

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JUDGMENT

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1. This case demonstrates the importance of having a friend at Court when dealing with what are essentially ex parte applications, because one of the parties regularly fails to appear. I hope that it may also serve to remind practitioners of their duty to assist the Court by bringing to its notice all matters material to the exercise of its jurisdiction, even though they may be unfavourable to their clients in some instances. After numerous applications, spread over more than two years and frequently fraught with procedural errors and omissions, I now find myself in the embarrassing position of having made an order which I had no jurisdiction to make. I express my sincere appreciation to the Registrar of the District Court for bringing the error to my notice in the first place, and for doing so in time to enable me to take steps to prevent that order from being carried into effect.

2. On the 11th December 1987, the Plaintiff commenced proceedings in the District Court (CJA No. 17110 of 1987) to recover an alleged loan of $10,000. Judgment in defalut was obtained on the 16th May 1988. On the 21st June 1988 the Plaintiff obtained a Charging Order Absolute over the Defendant's one share in Nodic-Matsumoto Progress (H.K.) Co. Ltd. ("the Company"), a private company incorporated in Hong Kong on the 18th January 1983. The Company has a nominal capital of $500,000, divided into 50,000 shares of $10 each share, of which 5,002 were issued. The Plaintiff is the holder of 2501 shares. The remaining 2500 are held by SIU Mee-lee whose address is the same as that of the Plaintiff. The Defendant is not a director of the Company and his presence or co-operation is not required for the transaction of business at any general meeting. Although he has been served in accordance with the rules at various stages, he has never appeared to answer or oppose any of the steps taken by the Plaintiff to secure or enforce the judgment debt.

3. On the 27th April 1989, the Plaintiff took out an originating summons seeking, inter alia, an order for the sale of the Defendant's one share in the Company. This step was taken in accordance with Order 50 Rule 9A of the Rules of the Supreme Court. Although I was curious as to the reasons for devoting such time and expense on seeking to gain control of the Defendant's one share, valued variously at $13.74 and $137.29, I have never been given any explanation. Eventually, and not without some reservations and doubts, I was persuaded on the 30th October 1990 to make an order for the share to be sold to the highest bidder on the 14th December 1990, after advertising the same. For some reason, which has not been explained, the Plaintiff's solicitors did not proceed with that sale. On the 10th April 1991, they took out another summons asking for the time limited for the sale of the share to be extended, and for further directions. That summons came before me on the 9th May 1991. Being satisfied that the Defendant had been served in the usual way, and had been served personally with the order for sale on the 27th November 1990, I was persuaded to grant the extension sought. However, I was unhappy with the Plaintiff's proposals for the conduct of the sale and directed that it should be conducted by the Registrar of the District Court. It was then that the Registrar drew my attention to Section 21D of the Supreme Court Ordinance (Cap. 4), which appears to exclude shares in private companies from the Court's power to order a sale to enforce a charging order. By notice dated the 28th May 1991 I notified the Plaintiff and the Defendant of my decision to exercise my power of review in accordance with section 53 of the District Court Ordinance (Cap. 336).

4. On behalf of the Plaintiff, Miss Cruden submitted that the District Court does have power to order a sale of shares in a private company as a method of enforcing a charging order over such property. She further contended that, in the circumstances of the present case, it would not be proper to exercise my power of review; and that the Defendant should be invited to appeal against the order for sale. I will deal with these submissions separately.

5. Section 21D is one of several amendments of the Supreme Court Ordinance, introduced in 1987. Sections 20, 20B, 21, 21A and 21B have their counterparts in the District Court Ordinance, namely, sections 52A, 52C, 52D and 52E. But there is nothing equivalent to section 21D of Cap. 4, the material part of which reads as follows :-

"(1) The following property is liable to attachment and sale in execution of a judgment, namely, land, goods, money, bank notes, cheques, bills of exchange, promissory notes, Government stock, bonds, or other securities for money, debts, shares in the capital or joint stock of any company or corporation, (other than a private company within the meaning of section 29 of the Companies Ordinance) and all other property whatsoever, whether movable or immovable, belonging to the judgment debtor, and whether the same is held in his own name or by another person in trust for him or on his behalf :"

6. In my view, the words in brackets clearly exclude shares in private companies from any sale in execution, although they can be the subject of a charging order by virtue of sections 20 and 20A of Cap. 4. Miss Cruden submitted that this limitation did not apply to orders made in the District Court, since it was not governed by provisions of the Supreme Court Ordinance. Only some of the Rules of the Supreme Court apply to proceedings in the District Court by virtue of Rule 9 of the District Court Civil Procedure (General) Rules. Prima facie, that is correct. But, if the matter rested there, the District Court would have no power to impose charging orders over shares in any company, since section 52A of the District Court Ordinance is confined to charges on land or interests in land. In my view, the jurisdiction of the District Court is not so restricted. To the extent that it is not expressly provided, I consider that the Court has the same powers as the High Court to grant "relief, redress or remedy" in respect of its own judgments by virtue of section 48 of the District Court Ordinance. (Cf. Xavier v. Xavier [1976] HKLR 964 at 966-8). But this ancillary Jurisdiction must, in my view, be subject to the same limitations imposed on the High Court by section 21D of the Supreme Court Ordinance, notwithstand the absence of any similar provision in the District Court Ordinance. Accordingly, it must follow that I had no jurisdiction to order the sale of the Defendant's share in the Company, unless section 21D can be construed as not applying to charging orders.

7. The words of the statute are very clear in excludig shares in private companies from sale in execution. Miss Cruden was unable to advance any argument in favour of restricting their scope. Order 50 rule 9A of the Rules of the Supreme Court merely regulates the procedure for enforcing charging orders by sale. There is no marginal note to indicate the provenance of Section 21D, but it seems to me to have been derived from Order 47 rule 7 before the amendment of the Rules of the Supreme Court in 1988. Formerly that rule read as follows :-

"The following property is liable to attachment and sale in execution of a judgment, namely, land, houses, goods, money, bank notes, cheques, bills of exchange, promissory notes, government securities, bonds, or other securities for money, debts, shares in the capital or joint stock of any public company or corporation, and all other property whatsoever, whether movable or immovable, belonging to the judgment debtor, and whether the same is held in his own name or by another person in trust for him or on his behalf."

Whether shares in private companies were excluded is arguable. But, if they were impliedly excluded, the rule could be construed as applying only to execution by means of the writ of fieri facias. However, when the words of the rule were adapted and elevated to the status of a section of the Ordinance, there is nothing in the words or context of the enactment to indicate that section 21D is confined to any particular mode of execution. It is expressed in clear and general terms and, in my view, applies to all means of execution.

8. For the above reasons I am satisfied that I did not have jurisdiction to order the sale of the share in the Company. Of course, it is now too late for me to review the order for sale made on the 30th October 1990. But the decision to review my order of the 9th May 1991, and the actual review have been carried out within the time permitted. Miss Cruden submitted that it would not be proper to review that order because to do so would nullify the previous order, which I am not allowed to review. The proper course is to invite the Defendant to appeal against that order. I have considered that submission very carefully. If the decision to review were based solely on the factual merits of the order dated the 9th May 1991, I would respectfully agree that it would be wrong to use the review power so as to nullify, in effect, the original order. But when, as in this case, it arises out of ignorance of a statutory provision going to the very jurisdiction of the Court, I consider that it cannot simply be left to one of the parties to decide how to deal with the difficulty. As was said in Choi Hau-ying v. Teh Hu Steamship Co. (H.K.) Ltd. [1969] DCLR 29 (at 32) :

"..... a Court, if it has doubts as to its own jurisdiction, should raise them; and if satisfied that those doubts are valid, should refuse to continue further."

I am in no doubt that, whilst the District Court has jurisdiction to make charging orders on shares in private companies, it has no jurisdiction to enforce such a charging order by a sale of the shares. It may be that the order made on the 30th October 1990 ceased to have effect when it was not carried out. But, if it was capable of being revived by extending the time under Order 3 of Rules of Supreme Court, I am clearly of the view that it should not have been revived. It would not be right to require the Registrar to conduct a sale which the Court had no jurisdiction to order. For these reasons, I rescind the order made on the 9th May 1991, and by way of review I dismiss the summons dated 10th April 1991.

9. It is highly unsatisfactory that the vital question of a Court's jurisdiction is not made clear in the statute creating it, but has to be gathered by reference to other statutes and rules having statutory force. As this case is likely to be of general importance, I readily grant the Plainiff leave to appeal to the Court of Appeal, and give permission for this judgment to be published.