RE MALE LAW KIN MAN

1991, No.CWU218

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H E A D N O T E

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Application to determine whether leave is required under s.186 of the Companies Ordinance in order to commence proceedings under s.17 of the Drug Trafficking (Recovery of Proceeds) Ordinance.

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J U D G M E N T

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1. The issue for determination upon this application by the Attorney General is whether it is necessary to obtain leave under s.186 of the Companies Ordinance, Cap.32 in order to commence proceedings for an appeal having regard to the provisions of s.17 of the Drug Trafficking (Recovery of Proceeds) Ordinance, Cap.405. Although in effect the application was for a ruling, I informed Mr Grossman who appeared for the Attorney General that the alternative relief for a declaration that leave is not required was inappropriate, and that he must either proceed to apply for leave under s. 186 or withdraw the summons. Mr Grossman then decided to apply for leave and abandoned the relief sought for a declaration.

2. Accordingly, the Attorney General seeks leave to commence an appeal against an order made by Barnett J. on the 5th July 1991 in which he varied a restraint order made under s.10 of the Drug Trafficking (Recovery of Proceeds) Ordinance, on the application of the Bank of Credit and Commerce Hong Kong Limited (B.C.C.). The restraint order was made on the 29th May 1990 and prohibited 47 respondents suspected of being involved in drug trafficking from dealing with certain realisable property including a number of bank accounts with B.C.C. Barnett J. varied the order by enabling B.C.C. to exercise rights of set off and consolidation.

Section 186 of the Companies Ordinance reads :-

" When a winding-up order has been made, or a provisional liquidator has been appointed, no action or proceeding shall be proceeded with or commenced against the company except by leave of the court, and subject to such terms as the court may impose."

3. When Barnett J. gave his decision on the 5th July 1991, the winding up petition against B.C.C. had not been presented. However, on the 18th July 1991, the day after the presentation of the winding up petition on the 17th July 1991 against B.C.C. by the Financial Secretary and the appointment of the Official Receiver as provisional liquidator, the Attorney General filed a notice of appeal against the decision of Barnett J. without obtaining leave under s.186. On the 30th July 1991, a notice of motion was issued by the provisional liquidator to dismiss the Attorney General's appeal on the grounds that no leave had been obtained under s.186. The Attorney General subsequently made an application to Barnett J. for leave to proceed with the appwal under s. 186 which was dismissed on the 9th August 1991 on the grounds that hte section could not operate retrospectively. Barnett J. also said that if he had been able to exercise jurisdiction, he would not have exercised his discretion in favour of the Attorney General. In fact, with respect to Barnett J., there is clear authority that retrospective leave can be granted, see Re Irish Shipping Ltd. [1985] HKLR 437 at 441. However Barnett J. did not have the benefit of authority on this point.

4. The Attorney General eventually decided to apply to withdraw the appeal in order to obtain a ruling from the Companies Court as to whether leave is required under s.186 to proceed with the appeal. As a result, the Attorney General obtained the leave of the Court of Appeal to withdraw the appeal on the 7th January 1992.

5. Accordingly, it is necessary for me to consider the effect of s.17 of the Drug Trafficking (Recovery of Proceeds.) Ordinance that deals with the winding up of a company holding realisable property arising from the proceeds of drug trafficking on s.186. If leave is required, I shall then have to decide whether or not to exercise my discretion in favour of the Attorney General. The crucial part of s.17 is subsection (3) which provides :-

"17 (3) Nothing in the Companies Ordinance (Cap.32) shall be taken as restricting, or enabling the restriction of, the exercise of the powers conferred on the High Court by sections 10 to 13.

6. My attention was drawn by Mr Grossman to a decision of Otton J. in In the Matter of "M" (unreported) delivered on 18th February 1991. In that case Otton J. considered the effect of a similar provision to s.186 in England, s.252 of the Insolvency Act 1986 with regard to a restraint order made under the Drug Trafficking Offences Act 1986. Section 252 provides :-

"(1) In the circumstances specified below, the court may in the case of a debtor (being an individual) make an interim order under this section. (2) An interim order has the effect that, during the period for which it is in force - (a) no bankruptcy petition relating to the debtor may be presented or proceeded with, and (b) no other proceedings, and no execution or other legal process, may be commenced or continued against the debtor or his property except with the leave of the court."

Otton J. held that leave of the County Court under s.252 was not required for an application under s.8(6) of the Drug Trafficking Offences Act 1986 for the appointment of a receiver for realisable property. The two procedures as described by Otton J. are not co-extensive, but discrete and complementary. I respectfully agree with the conclusions of Otton J. which are of strong persuasive authority. Indeed I am quite satisfied that s.17(3) of the Drug Trafficking (Recovery of Proceeds.) Ordinance precludes the exercise of jurisdiction under the Companies Ordinance consequent upon the powers conferred upon the High Court by sections 10 - 13. Accordingly, I hold that the Attorney General does not need to apply for leave under s.186 to proceed with the appeal. In the event that I had decided that leave was necessary, I would, after having considered all the evidence and with respect to the decision of Barnett J. on this issue, have exercised my discretion in favour of the Attorney General subject to argument by the parties for conditions to be imposed.

7. Further, there is authority, Humber & Co. v. John Griffiths Cycle Co. [1901] 85 LT 141 that leave, in any event, is not required for lodging an appeal. Mr Faulkner who appeared for the provisional liquidator indicated that he was able to distinguish that case, but it was unnecessary to do so for the purposes of this judgment.

8. Finally, I would like to make some observations upon the stance taken by the provisional liquidator in these proceedings. Although the provisional liquidator is an officer of the court whose duty it is to act impartially, both before Barnett J. and in the evidence filed he has taken an adversarial approach by opposing the Attorney General's application for leave. The duty to act impartially is conveniently set out in McPherson The Law of Company Liquidation Third Edition at p.217 which reads :-

"In Gooch's case (1871) 7 Ch App 207 at 211, it was stated to be: 'of the utmost importance that the liquidator should .... maintain an even and impartial hand between all individuals whose interests are included in winding up. He should have no leaning for or against any individual whatever.'"

In other words, a liquidator should take a neutral stance upon such applications and present any information that will be of assistance to the court. It is not his duty to take sides.

9. In the result the application is refused.

(Submissions on Costs)

10. Both parties sought costs of the application today and the costs that were referred by the Court of Appeal for my determination by the order of the 7th January 1992 when the Attorney General's appeal was withdrawn. In particular Mr Grossman said that it was necessary to obtain a ruling for he argued that the provisional liquidator had forced him into this position by his insistence that leave was required under s.186.

11. In fact the solicitors for the provisional liquidator, as I have said, took active steps by issuing a notice of motion on the 30th July 1991to dismiss the Attorney General's appeal on the grounds that leave had not been granted. I merely reiterate that the provisional liquidator should not have entered into the arena by adopting this course. In fact, one of the reasons for the wasted costs which Mr Faulkner referred to in the abortive proceedings in the Court of Appeal that in turn led to today's hearing is attributable to the stance taken by the provisional liquidator. Nevertheless, blame must also lie with the Attorney General who was unsure as to whether leave was necessary.

12. If an order is made under s.186, costs are normally awarded in the cause of the proceedings. However, as I have held that leave is not required, and taking into account all the circumstances of this case to which I have referred, I shall make no order as to costs. I also direct that the provisional liquidator is not to be entitled to charge any fees payable out of the assets of B.C.C. without the leave of the court.