CHAN TAT WAH AND ANOTHER v. JOY EXCEL CONSULTANTS LTD

HCMP 3397/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3397 OF 2013

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BETWEEN

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HCMP 3398/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3398 OF 2013

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BETWEEN

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HCMP3400/2013

IN THE HIGH COURT OF THE

ONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3400 OF 2013

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BETWEEN

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HCMP 3401/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 3401 OF 2013

______________________

BETWEEN

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D E C I S I O N

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1.  I have before me four originating summonses issued pursuant to section 122 of the Companies Ordinance, Cap 32, seeking orders extending the time period for the four relevant respondent companies to lay their profit and loss accounts and balance sheets for various financial years before the companies in an  annual general meeting.

2.  In the case of three of the companies, Joy Excel, Karlson, and Well Creation, the delay arises in respect of one year only.   In the case of the 4th company, Wealth Trinity, it relates to three years. 

3.  The nature of the problem in each case is the same.  The companies had financial statements prepared and audited, and put before the companies in annual general meetings, however, they did not put them before the annual general meetings during the period required by section 122.  I am, however, satisfied that in each case the breach of the ordinance arose as a result of inadvertence.  It caused no prejudice to the shareholders, and it is unlikely that similar breaches will be repeated in the future.

4.  Section 351 of the Ordinance provides that prosecutions for breach of the Ordiance must be commenced within three years of the date of the breach.

5.  In the case of Karlson and Wealth Trinity, the breaches all occurred well before the expiry at that period, and the breaches could not be prosecuted.  In the case of Joy Excel and Wealth Creation, the breaches occurred in 2012. 

6.  The reason the applications had been made is not, therefore, because of a concern on the part of the directors that there is a risk of prosecution, which obviously there are not in two cases and which are unlikely in the case of Joy Excel and Wealth Creation, it is because the ultimate holding company of the four respondent companies is applying for listing on the Growth Enterprise Market of The Stock Exchange Hong Kong Limited. 

7.  As I have discussed in earlier decisions, it would appear that the practice of The Stock Exchange is understood by those advising applicants for listing to require applications to be made where possible for the rectification of breaches of the ordinance: see in particular, Purapharm Research Corporation Limited[1]. Applications to rectify breaches of this sort have increased exponentially in the last year or so. 

8.  In 2013, approximately 250 originating summonses were issued by the middle of December pursuant to sections 111 and 122 representing approximately 8 percent of all miscellaneous proceedings issued in the High Court.  These applications, therefore, are taking up a considerable amount of the Companies Court’s time.  

9.  In my view, it is quite clear that applications of it sorts are unnecessary and should not be brought in respect of breaches which have expired more than three years prior to the application and in respect of which there is no risk of prosecution, simply to satisfy the requirement of The Stock Exchange. This is particularly the case as it would appear from the listings of Love Night Clubbing Holdings Limited and Hong Kong Times Property Investments Limited, that even when the Court is not satisfied that it is appropriate to grant orders, The Stock Exchange allows listings to go ahead anyway. 

10.  I will grant orders in respect of the applications by Joy Excel and Well Creation, but I will dismiss the originating summonses in respect of Karlson and Wealth Trinity. 

11.  As I have said on a number of occasions now, I hope that The Stock Exchange and the advisers to applications for listings will have regard to the Companies Court’s comments about the proliferation of these kind of unnecessary applications, and a suitable change to The Stock Exchangepractice will be implemented in order that the High Court’s resources do not continue to be unnecessarily imposed upon.