B S C SHINWA KOGYO CO LTD and B S C INTERIOR CONTRACT AND ENGINEERING CO LTD v. THE REGISTRAR OF COMPANIES AND OTHERS

HCMP 2272/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2272 OF 2006

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J U D G M E N T

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1.  This is an application under section 290 of the Companies Ordinance (Cap. 32) (“the Ordinance”), seeking an order that the dissolution of Yiu Cheung Glass Mirror Company Limited (“the Company”) should be declared void. 

2.  The application is brought by two applicants, B S C Shinwa Kogyo Company Limited and B S C Interior Contract and Engineering Company Limited. 

3.  There are three respondents to the application, being the Registrar of Companies, the former liquidators of the Company Mr Derek Lai and Darach Haughey, and Dah Sing General Insurance Company Limited, which was the insurer of the Company in respect of certain construction works that the Company was undertaking. 

4.  The background to the application is that the Company went into liquidation in about October 2001, with the liquidation coming to an end in April 2005.  On 19 July 2005 the Company was dissolved pursuant to section 248 of the Ordinance, that being the date three months after the filing of the relevant documents with the Companies Registry, notifying the Companies Registry that the liquidation had come to an end.

5.  The reason for the application is that the applicants wish to be able to pursue possible claims for contribution or an indemnity from the Company in the context of proceedings that had been brought against them and other parties by a former employee of the Company in respect of an accident which was suffered by the employee in January 2001, during the course of his employment by the Company.

6.  The brief background to the accident is that the Company was involved in a construction project in which it was the subcontractor of the 1st Applicant.  The 1st Applicant was in turn the subcontractor of the 2^nd Applicant, which was a nominated subcontractor in respect of the interior decoration works at the building site in question.

7.  During the course of the works, the employee of the Company was involved in the fixing of glass panels near a lift shaft, which was intended to be used for bubble lifts in the building and, unfortunately, fell into a void space through scaffolding that was erected over the void space, falling from what was described as the ground floor into the void space, and landing at the third basement level, slightly over 40 feet below. 

8.  As a result, the employee suffered serious injuries and has been left a tetraplegic.  Not surprisingly, he commenced proceedings, both under the Employees Compensation Ordinance and at common law, to seek compensation for the injuries that he has suffered.

9.  The liquidators participated for a time in the employees compensation case, but during the course of those proceedings the liquidation came to an end.  The liquidators gave notice to the District Court, and to the other parties to those proceedings, of the fact that liquidation was coming to an end and that the Company would, in due course, be dissolved.

10.  Although the employee compensation proceedings were commenced in 2003 and continued into 2005, common law proceedings were not started until about January 2004.  A statement of claim was eventually served in March 2005. 

11.  The Applicants say that they only came to know of the dissolution of the Company in November 2005, some four months after the dissolution took place.  The reason that they give for this is that, although they were parties to the employees compensation claim and were also parties to the personal injuries claim, until about late 2005, they took no active part themselves in either set of proceedings as the matter was being handled by solicitors who were instructed by their own insurers.

12.  They say, and I accept for present purposes, that they were themselves unaware of the status of the liquidation, and that they were unaware, in particular, that the liquidation was coming to an end and that the Company would be dissolved.  They say that they only discovered this after their insurers ceased to run the proceedings that had been brought against them, at which time they appointed their own solicitors to take over from the solicitors previously appointed by the insurers.  It was at this point, it is said, that the applicants came to know that the Company had, in fact, been dissolved. 

13.  They accept that they were aware that the Company was in liquidation, as there had been previous correspondence between the liquidators and the Applicants, by which the liquidators sought to recover moneys that were said to be owing by the Applicants to the Company.

14.  At the hearing today, the Registrar of Companies has indicated that he has no objection to the application and is prepared to consent to it.  So far as the 3rd Respondent, the Dah Sing General Insurance Company Limited, is concerned, it has written to the court and indicated that it does not consider that it is bound by the terms of the insurance policy with the company, but that, on the basis that this application does not in any way dispose of that question, they do not wish to appear, and have no submissions to make. 

15.  I therefore proceed on the basis that the insurance company is essentially neutral as far as this application is concerned, although it does of course reserve its rights to argue that it is not liable under the insurance policy in due course, if the question should arise.

16.  The liquidators, however, have indicated that they do not think that any useful purpose is to be served in reviving the Company.  They also suggest that the Applicants have failed to provide good reasons for the revival of the Company, or to explain their failure to take steps to bring claims against the Company earlier during the course of the liquidation, and that in those circumstances the Applicants have not made out a sufficient case for the court to exercise the discretion which it has under section 290 in their favour. 

17.  Two principal arguments were put forward by the liquidators.  The first relates to whether or not the Applicants have shown good grounds for their failure to take steps earlier so as to provide the court with the basis on which to exercise its discretion under section 290.

18.  As to this, I was referred to a decision of Madam Justice Kwan in Re Max Win Engineering Limited (unreported, HCMP 1913 of 2002, 24 May 2002), and to an earlier decision of Madam Justice Yuen, as she then was, in Re Intel-Wide Investment Limited (unreported, HCMP 940 of 1997, 17 February 1998). 

19.  In the Max Win case, Madam Justice Kwan held, in effect, that the fact that an application had not been made at an earlier stage to defer the dissolution of the company from taking place was not in itself a reason to reject an application under section 290.  In my view, that must be right. 

20.  However, in the Intelwide case, Madam Justice Yuen indicated that in order to succeed in an application under section 290, it was necessary for a creditor to provide some explanation for its failure to have taken steps to bring its claim earlier in the ordinary course of liquidation.  In that case, the creditor concerned was the Inland Revenue Department, which would appear to have been fully aware of the liquidation, and also fully aware of the fact that it may have had a potential claim against the company.

21.  In this case, it has to be said that the applicant must be taken to have been aware of the fact that they had a claim against the company for contribution or indemnity, either in the context of the employees compensation proceedings or in the context of the common law action. 

22.  However, it seems to me that having regard to the evidence that the applicants were not themselves in control of the employees compensation or common law proceedings and were not directly involved, it seems, in the instructing of the solicitors who were handling those proceedings previously, when the matter was being dealt with by their own insurers, in those circumstances, the fact that the applicants, when previously represented by other solicitors not instructed by them, did not take steps to pursue any claim for an indemnity or contribution is, I would accept, an adequate explanation for their failure to do so.

23.  In the circumstances, it seems to me that the applicants have provided an explanation for their failure to take steps earlier which justifies the court in exercising its discretion under section 290 if it would otherwise be right to do so.

24.  That leads onto the second point made by the liquidators, which is that no useful purpose will be served in this case because of the terms of an exclusion clause under the contract of insurance, which had the effect of excluding liability for injury that was suffered by a person who was working at the height of more than 30 feet above ground or floor level.  Since in this case it is common ground that the injured person fell a distance of in excess of 40 feet from where he was working, the liquidator suggests that the exclusion clause comes into operation so that there is no liability on the part of Dah Sing General Insurance Company Limited under its insurance contract with the Company.

25.  Mr Khaw, who appears for the Applicants, has submitted that in the light of the fact that the injured person was working at the ground floor level, or was so described in the accident report prepared by the Labour Department at the time of the accident, there is at least an arguable case that the exclusion does not bite.  It seems to me that there is, at least, an arguable case as to this.  Whether or not it is a very strong case is not a matter that I need to consider at this point.  As Robert Walker J. said in the case of Re Oakleague Limited [1995] BCC 921 (at 924H), the attitude of the Companies Court in such cases is that provided the application for restoration falls within the general legislative purpose of the section, the company should be restored, leaving the question of whether restoration is going to do anyone any good to be decided by another tribunal in the appropriate context at a later stage.

26.  The legislative purpose of section 290 has been described by Lord Justice Hoffmann, as he then was, in Re Forte’s (Manufacturing) Ltd., Stanhope Pension Trust Ltd v Registrar of Companies [1994] BCC 84 at 87D, as being that:

“… ordinarily the purposes of section 651 [the English equivalent of section 290 of the Ordinance] are either to enable the liquidator to distribute an overlooked asset or a creditor to make a claim which he has not previously made.”

27.  In this case it is clear that the purpose of the intended restoration of the Company is to enable the Applicants, who are potential creditors of the Company, to make a claim against the Company, which they have not previously made, for an indemnity or contribution from the Company.  It also has the further purpose of enabling the Applicants, even if they should be unable to make any actual recovery from the Company, to seek to enforce their rights against the Company against its insurers directly pursuant to the provisions of the Third Parties (Rights Against Insurers) Ordinance (Cap. 273).

28.  In these circumstances, it seems to me there would be a purpose to be served by the restoration of the Company, and in the absence of some other prejudice to the Company which renders it unjust or inequitable that the Company should be restored to the Register, it seems to me that this is a case in which restoration should be ordered.  As it has not been suggested that there is any particular prejudice to the Company in being restored to the Register, I think it would be right for me to exercise my discretion to make an order substantially in terms of the order which is sought by the Applicants.

29.  As far as costs are concerned, I think, on balance, that the appropriate order would simply be for the Applicants to bear the costs of the Liquidators in relation to this application, to be taxed on a party and party basis if they are not agreed.

30.  So far as the future costs of the liquidators are concerned, that is a matter that I would expect to be resolved between the liquidators and the Applicants, but if it is not possible to resolve it by agreement, the liquidators can simply indicate that they wish to resign, tender their resignation, and at that point leave it to the Applicant to deal with the situation by proposing the appointment of other liquidators if they wish to do so.