PAN DI v. THE REGISTRAR OF COMPANIES AND OTHERS

HCMP 1444/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO1444 OF 2013

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D E C I S I O N

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1.  This is an originating summons for an order under section 291AB of the Companies Ordinance, Cap 32 that the registration of the company, Herostar Properties Ltd, be reinstated.

2.  Herostar Properties Ltd is a private company incorporated in Hong Kong on 31 March 2003 under the Companies Ordinance as a company limited by shares.  At all material times, there were only 2 shares issued by the company.  Between July 2003 and July 2007, the applicant Madam Pan and one Liu Hong Xia were the registered holders of the 2 shares respectively.  Until about 26 June 2007, they were also the only two directors.

3.  The applicant says that she and Liu held these 2 shares on trust for a company called GeoMaxima Holdings Co Ltd which is also a company incorporated in Hong Kong.  GeoMaxima is a company of which the applicant  s husband, Mr Sun Tian Gang, was and is a director and majority shareholder holding 99,900 out of 100,000 shares, with the other 100 shares being held by one Mr Guo Ting.  Madam Liu was a staff member of GeoMaxima until late 2005.  Liu and the applicant became directors and shareholders of the company on the instructions of Sun.

4.  In September 2003, the company purchased a property namely Flat C, 10^th floor, Banyan Mansion, Harbour View Gardens, 24 Taikoo Wan Road, Taikoo Shing at the price of HK$3,150,000.  The only business of the company had since been the holding of that property.  The applicant says, after the purchase, the 2^nd respondent, Mr Cheung Yu Ping, who was the assistant General Manager of GeoMaxima, was allowed to live in the property free of charge.  His wife, Xing Xiao Jing, the 3^rd respondent herein, also lived there with him.

5.  Sun was arrested in the Mainland in 2005 and detained by the Public Security Bureau there for 5 years until Nov 2010 when he was released on bail.  But even then he was not allowed to travel to Hong Kong.  The criminal charges were eventually withdrawn in 2012 and the travel documents were returned to Sun.  Since the arrest of Sun in 2005, the applicant had also stayed in the Mainland.

6.  The applicant says that after Sun  s release in 2010, they have discovered that:

(1) The name of GeoMaxima was struck off the register on 17 April 2009 under section 291(6) of the Companies Ordinance.

(2) Without the knowledge of the applicant, her husband or Liu, the 2nd respondent replaced Liu as a director of the company on or about 26 June 2007.

(3) The 2^nd respondent replaced Liu as a shareholder of the company on or about 6 July 2007.

(4) The 3^rd respondent became a director of the company on or about 13 November 2008.

(5) The 2^nd respondent, apparently on behalf of the company, signed an Agreement for Sale and Purchase dated 19 November 2009 and an Assignment dated 20 January 2010 selling and assigning the property to a third party for the sum of HK$6,685,000.

(6) On or about 8 September 2010, the 2^nd respondent applied for the deregistration of the company pursuant to section 291AA of the Companies Ordinance, and the company was deregistered on 28 January 2011.

7.  In 2011, on the application of Sun and Guo Ting (the members of GeoMaxima) under section 291(7) of the Companies Ordinance, the name of GeoMaxima was restored to the register.

8.  The applicant now applies for the company to be reinstated for the purpose of pursuing the 2^nd and 3^rd respondents for the acts they have allegedly done, in particular, the sale of the property and the appropriation of the proceeds of sale.

9.  The applicant filed evidence suggesting that the property was purchased in the name of the company using funds provided by GeoMaxima with the assistance of a mortgage loan.  GeoMaxima had also been paying the mortgage loan repayment instalments until Sun  s arrest.  An affirmation of Liu has also been filed by the applicant suggesting that certain documents filed with the Companies Registry after Sun  s arrest, bearing Liu  s name, had not in fact been signed by her.

10.  The Registrar of Companies, as the 1^st respondent to this application, has not taken any position in these proceedings.

11.  The 2^nd and 3^rd respondents   case is that in 2000 and 2001, Mr Cheung (the 2^nd respondent) was negotiating a deal on behalf of GeoMaxima with a third party and that Sun had promised to give him a bonus in the form of a residential apartment in Hong Kong if the deal was successful.  The respondents say that the deal was clinched and the property in question was the bonus that Sun gave Cheung.  They contend on this basis that the applicant and Liu held the shares in the company on trust for Cheung.

12.  Cheung further says that since 2005 he had paid the mortgage repayment instalments and other outgoings on the property.  He says that after Sun  s arrest, he and his wife, the applicant herein, could not be contacted.  Cheung admits signing the documents for the sale of the property in 2009 and deregistration of the company in 2010, contending that he had every entitlement to do so.

13.  The applicant denies that the property was given to Cheung as a bonus.  She says that the company had been holding the property as trustee for GeoMaxima as the purchase monies were provided by GeoMaxima.

14.  This is of course not the occasion for deciding or even discussing whether the property was a bonus for Cheung.  It is sufficient to note that there is an arguable case that it was not, and that therefore an arguable case that Cheung was not entitled to procure it to be sold and to pocket the net proceeds.

15.  It seems to me plain in these circumstances that the application ought to be acceded to. 

16.  If the applicant  s account of the facts prevails, then on one view the flat belonged to GeoMaxima with the company being the trustee.  On that basis the company, once reinstated, could as trustee institute an action against Cheung and Xing with a view to recouping the trust assets and reconstituting the trust for the benefit of the beneficiary.  Alternatively, GeoMaxima could bring an action against Cheung and Xing for dishonestly procuring a breach of trust by the company, joining the company itself as a proper party.

17.  It is also possible, however, on the applicant  s version of facts, that the flat belonged beneficially to the company, with GeoMaxima being the beneficial owner of the shares in the company and being owed by the company in effect a shareholder  s loan advanced for the purchase of the flat.  On this basis, the company would be the only party that could properly sue Cheung and Xing for the loss of the property, as GeoMaxima would be barred by the principle of reflective loss from bringing any claim directly itself.

18.  It is just that the company be reinstated so that any action against Cheung and Xing may be properly constituted beyond any doubt so that everyone may focus on the real issues.  This benefit, in my view, far outweighs any administrative cost that the reinstatement of the company may entail.

19.  Mr Chung argues that as Cheung was a 50% shareholder in the company, half of any recovery by the company would go to him.  But Cheung  s shareholding in the company was one of the very things that are likely to be challenged if the company is reinstated.  So, far from being a reason against reinstatement, it fortifies the present application.

20.  Moreover, the company was the vendor in the sale of the property and presumably the client of the relevant solicitors   firm and bank.  Any documents required from these third parties will be more efficiently obtained in the name of the company.

21.  For these reasons, I accede to the application.  The costs after the summons and the first affirmation of Madam Pan will be paid by the 2^nd and 3^rd respondents to the applicant.