RE CONFEDERATED ASSETS GROUP LTD

HCCW 98/2019

[2020] HKCFI 2365

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 98 OF 2019

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REASONS FOR DECISION

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1.  On 31 August 2020, I made an order that the petition presented by the petitioner on 4 April 2019 (as amended on 19 July 2019) (“Petition”) be struck out and the costs of the Petition be paid by the petitioner to the opposing contributories and the Official Receiver, to be taxed if not agreed, with reasons to be handed down later. These are the reasons for my decision.

2.  The Petition was presented by Mr Ng Kwok Ching Jeremy (“Petitioner”) under section 327(3)(c) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) (“Ordinance”) to seek a winding-up order against Confederated Assets Group Limited (“Company”) on the “just and equitable” ground. 

3.  Pursuant to the Order of Mr Justice Harris made on 2 September 2019, the Petitioner filed his Points of Claim on 18 November 2019 (“POC”) and the “Opposing Contributories” (as defined in §5(2) below) filed their Points of Defence on 9 March 2020 (“POD”). The Petitioner filed its Points of Reply on 17 March 2020 (“POR”).   

Background

4.  The Company was incorporated in the British Virgin Islands on 27 February 1997 and is an “unregistered” company within the meaning of section 326 of the Ordinance. 

5.  The Company has issued 126 shares which are currently held by 9 shareholders, all of whom are members of the Ng family.  They are divided into 2 camps and the number of shares held by each of them is stated in parentheses[1]:

(1)     One camp consists of the Petitioner (21 shares), his mother, Madam To Pui Kui (10 shares), Ng Yiu Chi Eleanor (17 shares), Ng Kay Chee Angela (1 share) and Ng Kwok Tai Andrew (13 shares).  Although the Petitioner claims that he has the “support” of these 4 shareholders[2], none of them has filed any notice of intention to appear in the Petition.  Nor have they taken any step in the proceedings. 

(2)     The other camp consists of Ng Kwok Piu Philip (43 shares), Ng Woon Chi Olympia (9 shares), Ng Kwok Tung Tony (3 shares) and Ng Oi Che Stephanie (“Stephanie”) (9 shares) (collectively “Opposing Contributories”). 

6.  As regards the 21 shares held by the Petitioner, it is not in dispute that:

(1)     On 3 March 1997, 34 shares were allotted to Stephanie of which 18 shares were held by her on trust for the Petitioner (POD §7(1); POR §7(1)). 

(2)     On 5 April 2000, the Petitioner was adjudged bankrupt in HCB 349/2000 (“1^st Bankruptcy”).  He was automatically discharged from bankruptcy on 5 April 2004 (POD §23; POR §17).

(3)     On 25 June 2005, Stephanie transferred 18 shares to the Petitioner (POD §7(5); POR §7(4)).

(4)     Pursuant to an instrument of transfer dated 8 May 1997 executed by the late father of the Petitioner, 3 shares were transferred to the Petitioner, but he was only registered as the holder of such shares on 25 January 2006 (POD §7(6); POR §7(5)). 

(5)     On 20 July 2015, the Petitioner was again adjudged bankrupt in HCB 2493/2015 (POC §27(2)).  According to Mr Jerome Liu, counsel for the Petitioner, the bankruptcy order was subsequently annulled. 

7.  By reason of the matters set out in §6(1)-(4) above, at the time the Petitioner was adjudged bankrupt on 5 April 2000, he was the beneficial owner of 21 shares in the Company (“Shares”).  By virtue of sections 12 and 58 of the Bankruptcy Ordinance (Cap 6), the Shares formed part of the Petitioner’s estate and vested in the Official Receiver in her capacity as trustee in bankruptcy on 5 April 2000.    

8.  In the agreed list of principal issues lodged with the Court, the Petitioner and the Opposing Contributories set out 9 issues which they say require determination of the Court.  The first 2 issues are: (1) whether the Petitioner has any shareholding interest in the Company after he had been adjudged bankrupt twice in HCB 349/2000 and HCB 2493/2015; and (2) does the Petitioner have locus or interest to commence the present proceedings?  Is the Petitioner abusing the court process in seeking to wind up the Company?

9.  At the case management hearing, Mr Liu proposes directions on the further conduct of the proceedings including discovery, application for leave to amend the Petition (to add an additional plea on loss of substratum or failure of the Company’s objects), consultation between the parties’ legal representatives and a further case management conference before the Court.  Mr Adrian Lai, counsel for the Opposing Contributories, does not object to the proposed directions.  This is surprising, given that the Opposing Contributories are alive to the point that the Petitioner has since his bankruptcy ceased to have any interest in the Shares.   

10.  It is well established that where, as here, a person has been adjudged bankrupt, he will be divested of all his assets, and the assets (including any rights attached thereto) will be vested in the Official Receiver as trustee for the creditors, and only the Official Receiver has the right to bring proceedings in respect of such assets.  The principles have been explained by Rogers VP in Koh Kee Suan v Ip Kay Lo [2001] 3 HKLRD 439 (at 441C-H) in this way:

“The effect of a bankruptcy order is, of course, that upon the making of the order the Official Receiver is constituted the receiver of the property of the bankrupt: see section 12 of the Bankruptcy Ordinance, Cap. 6. Thus, the bankrupt was divested of, and ceased to have any interest in, either his assets or his liabilities. As explained by Hoffmann LJ in the case of Heath v Tang [1993] 4 All ER 694, in the same way as the bankrupt is not able to pursue an action to recover a debt or damages for the benefit of his estate, he would not be entitled to appeal against an order which was enforceable only against his estate.

That decision was cited with approval by the High Court of Australia in the case of Cummings v Claremont Petroleum NL (1996) 185 CLR 124. As was pointed out by Dawson and Toohey JJ in that case, and is equally apposite in this case, if the appeal succeeds, nothing will come into the hands of the trustee which can be applied in the administration of the bankruptcy. Of course, the success of an appeal would mean that a substantial judgment would cease to be a debt provable in the bankruptcy. As far as this case is concerned, that would mean that a greater dividend would be payable to the remaining creditors than would otherwise be the case. But this still does not affect the fact that the judgment under appeal is a monetary judgment and, being a liability, the interest in that judgment belongs to the creditors.

  Any right of appeal in the present action was, therefore, vested as part of Dr Ip’s estate in the Official Receiver as trustee for the creditors.”

11.  As the bankrupt does not have any interest in the assets vested in the Official Receiver, he has no right to pursue any proceedings which may affect such assets.  He must obtain the permission of the Official Receiver to use her name to bring such proceedings and provide an indemnity in favour of the Official Receiver.  The same applies even if the person has been discharged from bankruptcy (Koh Kee Suan, at 443C-J). 

12.  It is clear that until the matter is raised by this Court at the hearing, the Petitioner has never informed the Official Receiver that at the time of the 1^st Bankruptcy, he was the beneficial owner of the Shares.  Nor has he informed the Official Receiver that he had presented the Petition in his capacity as registered holder of the Shares.  This is confirmed by Mr Liu at the hearing. 

13.  That being the position, it seems to me that the Petition is liable to be struck out in limine as the Petitioner has no right to present the Petition, and only the Official Receiver can exercise the rights attached to the Shares including the right to petition for the winding-up order of the Company. 

14.  I do not think it is open to the Petitioner to contend that as registered holder of the Shares, he is a “contributory” of the Company within the meaning of section 179 of the Ordinance and, therefore, has the locus to present the Petition.  This is because the Petitioner has since the 1^st Bankruptcy ceased to have any interest in the Shares.  As the registered holder of the Shares, he can only exercise the rights attached to the Shares at the direction, and for the protection, of the beneficial owners (Ng Yat Chi v Max Share Ltd & anor (1997-98) 1 HKCFAR 155, at 165, per Li CJ).  As the Shares have been vested in the Official Receiver for the benefit of the creditors in the 1^st Bankruptcy, the Petitioner cannot present a petition without the consent of the Official Receiver. 

15.  I therefore give the following directions at the hearing:

(1)     the Petitioner do forthwith inform the Official Receiver that (i) he owned the Shares at the time of the 1^st Bankruptcy, and (ii) he has presented the Petition as registered holder of the Shares;

(2)     the Petitioner and the Opposing Contributories do report to the Court by 1 September 2020 as to whether the Petitioner will give his consent to have the Petition be struck out or that he has obtained the consent of the Official Receiver to pursue the Petition; and

(3)     all further proceedings in these proceedings be stayed in the meantime.

16.  By letter dated 28 August 2020 (“Letter”), Messrs Khoo & Co, solicitors for the Petitioner, stated that the Petitioner had informed the Official Receiver the concerns raised by the Court but that the Official Receiver required more time to consider the matter.  They surmised that there is “a very good prospect” that the Official Receiver would agree to “re-vest the estate” to the Petitioner or consent to the Petition, for the following reasons:

(1)     the Shares are very valuable, given that the Company holds more than 10 valuable landed properties and has at least HK$46.9 million cash;

(2)     there is a very good prospect to repay the creditors in the 1^st Bankruptcy;

(3)     the Petitioner and the Official Receiver share the same stance, that is, to realise the Shares (by selling them to the Opposing Contributories, other members, or by public auction through negotiations, mediations and settlements with the Opposing Contributories, failing which the winding up of the Company).  After realising the Shares, the Official Receiver may then discharge her duty by repaying the creditors in the 1^st Bankruptcy; and

(4)     the Petitioner will bear the costs of the Petition.  The Official Receiver will be informed of the progress and to join in whenever she thinks it appropriate. As such, the Official Receiver only has to spend minimal legal costs and man-power which, they say, is in the public interest.  

17.  The Court has not been provided with the correspondence exchanged between the Petitioner’s solicitors and the Official Receiver.  Nor has the Court heard from the Official Receiver as to whether she agrees with what was stated in the Letter.  In any event, I do not think the reasons given by the Petitioner’s solicitors address the concern that the Petitioner does not have the right to present or pursue the Petition in the absence of the Official Receiver’s consent.  As matter now stands, the Petition is liable to be struck out for the reasons stated in §§10-14 above.  Indeed, the matters stated in the Letter reinforces the fact that the Petitioner does not have any right or interest to pursue the Petition, given that the Petitioner confirms that the Shares will have to be sold in order to raise funds to repay the creditors in the 1^st Bankruptcy.