XCHRX RE GOOD BROAD LTD. (IN LIQUIDATION)

HCCW 447/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO. 447 OF 1996

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D E C I S I O N

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1. This is an application by the joint liquidators of the Company under section 268 of the Companies Ordinance for an order that they may be at liberty to disclaim the ownership of one-third share of the external wall of a building.

2. Before I proceed to the merits of the application, I should say that it is not satisfactory that the joint liquidators have sent a representative to attend court today. Although I understand the difficulties of the representative, the fact remains that this is an application by the joint liquidators. If they do not instruct legal representatives to attend the application on their behalf, then since it is their application, they must appear in person. It is not adequate to send a representative authorised in a letter.

3. Having said that, I understand from the representative that of the two joint liquidators, one is not in Hong Kong and the other is not aware of the matter in dispute. Consequently, I have permitted the representative to continue with the application. However, I would like to emphasise that liquidators are appointed in their personal capacities and not as representatives of their firm, and therefore, it is necessary for the liquidators themselves to deal personally with any application in court unless they appoint legal representatives.

4. Turning then to the nub of the matter, the Company here was wound up in 1996. In 1997, liquidators were appointed. No committee of inspection was appointed in this case. Apart from a property which was mortgaged in which the Company has no equity, the only other asset of the Company is a one-third share in the external wall of an industrial building in Yuen Long. The building is 25 years old. The one-third share is held by the Company as a tenant-in-common with 4 individuals, each holding one-sixth share. In the nature of property holding in Hong Kong, these are undivided shares. The liquidators had offered the Company's undivided one-third share to the other tenants-in-common but they have received no response. The liquidators are of the view that the one-third share is unsaleable and have therefore applied for leave to disclaim this one-third share.

5. Section 268 of the Companies Ordinance provides for the disclaimer of onerous property in case of the Company being wound-up. Section 268(1) provides that where any part of the property of a company which is being wound up consists of land of any tenure burdened with onerous covenants or of any other property that is unsaleable or not readily saleable, the liquidator of the Company, notwithstanding that he has endeavoured to sell or has taken possession of the property, or exercised any act of ownership in relation thereto, may, with the leave of the court and subject to the provisions of this section, by writing signed by him, at any time within twelve months after the commencement of the winding up or such extended period as may be allowed by the court, disclaim the property.

6. In the present case, the application has been made well after twelve months after the commencement of the winding-up and therefore an extension is required from the court.

7. Section 268(2) provides that the disclaimer shall operate to determine, as from the date of disclaimer, the rights, interest, and liabilities of the Company, and the property of the Company, in or in respect of the property disclaimed, but shall not, except so far as is necessary for the purpose of releasing the Company and the property of the Company from liability, affect the rights or liabilities of any other person.

8. Section 268(3) provides that the court, before or on granting leave to disclaim, may require such notices to be given to persons interested, and impose such terms as a condition of granting leave, and to make such other order in the matter as the court thinks just.

9. Unlike a bankruptcy, the property of a company which is wound-up does not vest in the liquidators, so that liquidators of a company have no personal liability for any property. However, as responsible professional persons, it is right that liquidators should seek to obtain a disclaimer where the circumstances are appropriate. Further, the representative of the liquidators today has told me that it may be difficult to obtain a release of themselves as liquidators, unless they have dealt with this property one way or another.

10. The question is whether the court should give leave to disclaim this one-third share when the effect of the disclaimer would be that the Company's liabilities for the external wall, such as rates or maintenance expenses, would thereby be thrown onto other tenants-in-common.

11. I am particularly mindful of the fact that for an old building, such as a 25-year old industrial building in the New Territories, there may even be public liability considerations if the external wall is not properly maintained.

12. When the matter first came before me, I asked the liquidators to notify the other co-owners of the present application by virtue of the provision of section 268(3). The liquidators have done so but none of the other co-owners has appeared before me today.

13. If leave is granted for the disclaimer then the property of the Company, being the one-third share, would be disclaimed. The effect would be that the other co-owners would have the liability to maintain the external wall to that proportion.

14. In my view, that would affect the liabilities of other persons being the other co-owners. On the other hand, if leave for disclaimer is not granted, then upon the dissolution of the Company, the property of the Company including this one-third share with its rights and liabilities would become bona vacantia under section 292 of the Companies Ordinance.

15. I am mindful of the fact that whilst one can choose one's partners or other shareholders in a private company, one cannot choose co-owners in the way in which property is held in Hong Kong. That being the case, I take the view that it would be wrong in the exercise of my discretion to grant the disclaimer in this case because that disclaimer would affect the liabilities of the other co-owners.

16. Accordingly, I will decline to make an order in terms of the application sought.