NG MAN BIU t/a CHUNG TAI TRADING CO v. THE REGISTRAR OF COMPANIES AND OTHERS

HCMP5173/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.5173 OF 2003

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REASONS FOR DECISION

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1. Active System Trading Limited, the 2nd respondent ("the Company"), was deregistered pursuant to section 291AA of the Companies Ordinance.

2. This is an application under section 291AB(2) to reinstate the registration of the Company. The applicant claims to be a person "who feels aggrieved by the deregistration". It is the applicant's case that the Company is indebted to the applicant in a sum of HK$455,856.50 being the price of goods sold and delivered.

3. That was the subject of an action in the District Court brought by the applicant against the Company, namely, DCCJ No.9443 of 2001.

4. However, the applicant discontinued the action against the Company on 30 November 2001. The Order discontinuing the District Court action made by Master C.K. Chan of the District Court on 30 November 2001 was a consent order, and it reads :

"1. the Plaintiff hereby wholly discontinues this action against the Defendant;

2. the hearing fixed for 30th November, 2001 be vacated;

3. there be no order as to costs of this action and this application."

Under Order 21, rule 4 of the Rules of the District Court, the discontinuance "shall not be a defence to a subsequent action for the same, or substantially the same, cause of action".

5. According to the applicant, prior to the discontinuance of the District Court action, it was agreed between him and Mr Lee Chi Kong, the 3rd respondent, that the Company would pay the applicant the sum claimed. And that prior to the discontinuance, on 20 November 2001, the Company paid the applicant the sum of HK$80,000,0 as partial payment.

6. The 3rd respondent is a director and shareholder of the Company.

7. According to the 3rd respondent, the Company did indeed pay HK$80,000.00 to the applicant on or about 20 November 2001. However, that was in full and final settlement of the applicant's claim in the District Court.

8. Mr Anthony Cheung, who appeared on behalf of the 3rd respondent, quite fairly accepted that the court cannot determine whether the District Court action had been settled without hearing oral evidence from at least the applicant and the 3rd respondent. In other words, whether the action had been settled may well depend on the credibility of the applicant and the 3rd respondent.

9. Mr Cheung's submission coincided with my view. I do not think that I can decide, on the material before me, whether the District Court action had been settled or not. However, Mr Cheung went on to submit that I should hear evidence on the matter and, if necessary, order discovery and giving leave for further evidence to be filed so that I can decide whether or not the applicant is indeed a person who was aggrieved by the deregistration of the Company.

10. I do not believe the resolution of the dispute should be conducted in this application. I am of the view, in line with the court's approach when there is a bona fide dispute over debt on a winding-up petition, on such an application the court should not go into the dispute. This is a relatively straightforward case and, as I said to Mr Cheung, I would be tempted to dispose of the matter as speedily as possible. However, in principle, the court on such an application should leave the parties to resolve their differences in the appropriate forum and in the appropriate way.

11. As is clear from the evidence filed so far on behalf of the parties, whether or not the District Court action had been settled depends on credibility of witnesses. I cannot say that there is not a bona fide dispute, and that being the case, I should proceed on the basis that the applicant has a bona fide claim against the Company for goods sold and delivered. That is sufficient for the purpose of section 291AB(2).

12. Mr Cheung has submitted that I must consider whether it is just to do so in all the circumstances. In my opinion, it would be just to do so. If there is a genuine claim against a deregistered company and the claimant wishes to bring action against the company, the circumstances would have to be very unusual indeed if the court were to refuse to reinstate the company. The fact that a company may be insolvent is not in my opinion decisive. The bona fide creditor should be allowed to pursue his claim in the usual way.

13. In all the circumstances, the order that I would make, which Mr Lau who appeared for the applicant is prepared to agree to, is that on the applicant's undertaking to commence proceedings in the District Court against the Company for the recovery of the alleged debt within one month from today, and thereafter to prosecute the claim with reasonable diligence, I would grant an order reinstating the registration of the Company.

14. So far as the costs of the application is concerned, I would have made that in the cause of the District Court proceedings in the sense that if the applicant succeeds in the District Court, then the Company or the 3rd respondent must pay the costs of this application and vice versa. However, Mr Cheung has informed me that in the District Court proceedings, the Company may rely on defences other than the defence of settlement. That being the case, I have decided to reserve the costs of this application to await the disposal of the new action with liberty to apply.

15. As for the costs of the Registrar of the Companies who has adopted a neutral stance to this application, I order that the applicant pays such costs in the first instance. Such costs to be included in the costs of this application in due course.

16. The 3rd respondent is legally aided. There will be taxation in accordance with the legal aid regulations in respect of his own costs.