SUN HUNG KAI BANK LTD v. ATTORNEY GENERAL

BETWEEN

___________

JUDGMENT

___________

Cons, J. A.:

1. In January 1984 Advance Finance Limited ("Advance") owed $1 million to the Sun Hung Kai Bank Limited. It became due and payable on the 6th of the month.

2. On the 5th January there was a meeting between officials of the Bank and of Advance at which the Bank agreed to an extension until the end of February in the hope that Advance's holding company, Good Year Estates Limited, would be able to raise sufficient new capital for Advance to make full repayment. In consideration of the Bank's forbearing to press for immediate repayment Advance agreed to sub-mortgage a number of properties as security. The same afternoon, by a letter unfortunately dated as 1983, Advance forwarded to the Bank's solicitors title deeds in respect of 4 properties. The deeds in respect of two others were to come direct from the solicitors for Advance. The judge below referred to this letter as Letter 1 and I shall do the same. The material paragraph is as follows -

3. The documents referred to as "descriptive letters" were in fact the covering letters by which the title deeds had been forwarded by the original mortgagers to Advance in the first instance. In two cases their dates went back to January 1982.

4. On the 11th January solicitors for Advance forwarded, by means of Letter 2, the deeds in respect of two further properties, expressly however "on the usual understanding and subject to your undertaking to hold to our order and returnable upon demand".

5. On the 13th January the title deeds to two further properties were sent by Advance, Letter 3, in replacement of one of the properties covered by the letter of the 5th. "Descriptive letters" were apparently also attached. The purpose of the deeds was again said to be "for your preparation of the subject submortgage".

6. The Bank thus now held documents of title in respect of 7 properties, and these are listed as a schedule to a letter, Letter 4, which the Bank sent to Advance on the same day i.e. the 13th January, in these terms -

7. Confirmation has at no time been forthcoming.

8. By the 17th January the Bank's solicitors had prepared the sub-mortgage ready for execution, but on the 18th Advance went into voluntary liquidation. Special managers were appointed by the Provisional Liquidator.

9. Section 80(1) of the Companies Ordinance Cap. 32 provides -

10. The "prescribed particulars" are discovered by reference to Reg. 2 of the Companies (Forms) Regulations -

11. The form appropriate to the present instance is Form IV and so far as these proceedings are concerned the prescribed particulars are as follows -

12. Section 83(1) of the Ordinance requires the Registrar of Companies to keep "with respect to each company, a register in the prescribed form of all the charges requiring registration under this Part" and to enter therein -

13. On the 19th January solicitors for the Bank filled in a copy of Form IV as it stood and sent it to the Registrar of Companies. In the first column, headed Date and Description of the Instrument etc. they put "Bundle of letters dated ......." and then listed the dates of Letters 1, 2, 3 and 4. However between the dates of Letters 1 and 2 they inserted the dates of the four "descriptive letters" which had earlier accompanied Letter 1. No distinction was drawn between the two sets of letters in any way and photostatic copies of all were attached to the Form. In the third column, headed Short Particulars etc. were listed the legal titles to the first six of the seven properties concerned.

14. By a letter of the 23rd January the Registrar in effect rejected the application for registration. He pointed out -

He added that the statutory period would expire on the 18th February. Having received no word from solicitors by that date he sent a reminder on the 20th February.

15. Solicitors for the Bank replied on the 14th March. In order that the position of the Registrar at this stage may be appreciated it is necessary to set out that letter almost in full -

16. It is apparent that the solicitors were in some confusion as to the exact source of their clients' interests, - and incidentally as to the true nature of the register which the Registrar is obliged to keep -, but the terms of the letter clearly indicate to my mind that the solicitors considered the four letters to be "instruments creating or evidencing" those interests and were putting the letters forward as such.

17. The Registrar wrote again on the 19th March. He was doubtful whether any charge at all had been created because, as the solicitors had observed, Advance had refused to sign the legal mortgage and because Letter 4 had not been confirmed; furthermore if a charge had been created, the original had not been supplied. In the circumstances he declined to register the charge without a court order.

18. Such an order was made by Hunter J. on the 3rd April this year. His reasons, I hope without disrespect, may be stated concisely as four propositions -

19. The Registrar of Companies now appeals. Mr. Feenstra on his behalf makes two principal submissions, 1. that one or more of the letters did indeed constitute an instrument creating or evidencing a charge, and 2. that in fact the prescribed particulars were not delivered within 5 weeks. A third submission, not raised with the judge below, was that in any event upon a true construction of the legislation the remedy of judicial review was not available to the Bank. We allowed this point to be argued before us as a matter of general importance, Mr. Eddis for the Bank raised no objection. As authority, reliance is placed upon The Queen v. Registrar of Companies Ex Parte Esal (Commodities) Limited ^(1). The particulars originally filed in that instance were defective and the form submitted was returned by the Registrar. Subsequently, and out of time, a second form was submitted in which the prescribed particulars were correctly set out. In accordance with what was then his usual practice the Registrar in London accepted the second form, registered the particulars and issued his certificate in accordance with the English equivalent of Section 83(2), which latter reads -

20. At first instance an order was made setting the certificate aside. The certificate however was restored by the Court of Appeal. The Act provided that the Registrar's certificate should be conclusive and the courts could not go behind it; that was well established by the authority of Re Yolland, Husson v. Birkett Limited ⁽²⁾ and of Re C.L. Nye Limited⁽³⁾ .

21. Mr. Feenstra submits that by way of corollary the Court should adopt a similar principle and refuse to go behind the Registrar's refusal to issue a certificate. With respect I do not agree. No question of principle is involved. The decisions turn purely upon the actual words of the legislation and there are no words in the instant legislation to support the position he seeks. Moreover the commercial reason seen behind this legislation, namely that "once the registration has been effected and the certificate has been issued, so that there will not thereafter be any dispute as to whether or not the requirements of the Act as to registration were in truth properly complied with", has no validity with respect to a non-registration. I appreciate that there are dicta in their Lordships' judgments which on their face could be taken as granting a wider immunity to the Registrar, but his position on a refusal was in no way an issue before the Court and I do not take the remarks as intending to lay down the broader proposition contended for. In my view the Courts do have jurisdiction to interfere in an appropriate case. Even so, it does not necessarily follow, were the Registrar's refusal wrong in the present instance, that this would be such an appropriate case. As the Company is already in liquidation the crucial question, to which I shall shortly turn, is the delivery of the particulars. That could perhaps have been dealt with more conveniently in litigation between the Bank and the Liquidator.

22. It is convenient here to set out in full the judge's conclusion as to the meaning of "instrument" -

23. A similar argument was rejected by the Court of Appeal in England.  Hunter J. did not, of course, have the assistance of that decision which came several months later.   Slade L. J. thought that the word "instrument", in that context, (was) wide enough to include both formal and informal documents. Dillon L. J. adopted a definition from Mason v. Schuppisser⁽⁴⁾ -

24. That definition was sufficient for his purpose because in Esal⁽¹⁾ the documents in question did create a charge. We have to consider documents by which it may "be evidenced". For my part I do not think that phrase embraces documents which, coincidentally to their main purpose, merely indicate that a charge must at sometime or somehow have been created. More direct association is necessary. I hesitate to introduce further language, but it seems to me that the words in the subsection are intended to cover those documents by which a written charge could reasonably be said "to be sufficiently established". In my view the letters put forward in the present instance, although instruments in the sense in which I understand that word, do not go that far in respect of any charge, and Mr. Feenstra's first point fails.

25. If I should be wrong however and the letters were sufficient instruments within the subsection I am satisfied that the originals should have been produced. This is apparent from other sections in that part of the ordinance and were so taken by their Lordships in the English Court of Appeal. In that case the appeal would be bound to succeed.

26. Assuming however, as I do, that whatever charge the Bank was seeking to register did not rely upon an "instrument", what were the prescribed particulars in so far as column 1 of Form IV was concerned? With every respect to the judge below I find it impossible to accept that there were none. How in that case could the Registrar enter, as the law required him, the date of creation of the charge? I turn again to Reg. 2. I note that it refers to the forms contained in the schedule "with such variations and additions as the circumstances of the particular case may require". It seems to me clear, having regard to the duties of the Registrar and the general scheme of that part of the ordinance, that this is a circumstance where variation is necessary. The exact nature of that variation may perhaps be a matter of opinion but the Registrar must be able at least to identify the charge from the matter that is particularised in the form.

27. The next question then is whether the documents submitted did sufficiently identify the charge which the Bank was seeking to register. That is said to be, as I understand the position now, not exactly as found by the judge below, but instead to be "an equitable charge of the 6th January in respect of three of the properties, of the 12th January in respect of two more of the properties and of the 14th January in respect of the remaining two", all to secure an amount of $1 million in favour of the Bank. The different dates reflect the different days on which the documents of title were forwarded to the Bank, allowing 1 day for the normal course of the post. To my mind such deposits created, if anything, 3 separate charges, but perhaps that point is not important. The crucial question is whether the Registrar could be expected to identify them. In my view he could not. There is nothing in Letter 1 or 3 to indicate an intention to deposit by way of security. Letter 2 goes the other way, at least so far as the two properties therein are concerned.

28. Then we must consider the letter of the 14th March. Mr. Eddis has constantly referred to this as being "by way of explanation". With respect it appears to me more in the nature of belated particulars. In either event it does hot help. It still does not present the footing on which the claim is now based. Instead it adds further confusion by the introduction of a contract said to be enforceable by reason of part performance.

29. It is necessary now to mention a further question. In the absence of an "instrument" is it necessary for an applicant to spell out the particulars himself, or may he leave it to the Registrar to discover them from the documents accompanying Form IV? At first instance in Esal^.(5) Mervyn Davies J. opted for the former alternative -

30. Lawton L. J., on the appeal, may have been tempted towards a similar line when he said -

31. Dillon L. J. however was contrary minded -

32. Hunter J. adopted a similar approach in the court below:

33. For my part I do not think it is possible to lay down a precise rule. In very clear cases it may well be sufficient for the applicant to complete Form IV simply by reference to an accompanying document, or even perhaps to a number of documents, provided that, as Dillon L. J. suggested, the prescribed particulars can be ascertained "with the use of a little common sense on the part of the Registrar". But I find nothing which requires the Registrar to go beyond that. The burden is on the applicant to deliver particulars. It is not for the Registrar to search them out.

34. In my judgment what was required of the Registrar in the present instance was well beyond the use of a little common sense. He would have had first to settle the apparent contradictions between the various letters. He would then have needed to research Halsbury's Laws of England to find the passage on which reliance is now, for the first time, placed ⁽⁶⁾ -

35. The authority referred to in the text is Keys v. Williams ⁽⁷⁾ where Lord Abinger C. B. said -

36. Having done all that the Registrar would probably have been satisfied, as at present advised I am, that the Bank did have good equitable charges against the Company, but to say that in those circumstances the Bank had "delivered particulars for registration" of those charges would be to my mind a distortion of language.

37. For these reasons I would allow the appeal and set aside the order made below.

Sir Alan Huggins, V.-P.:

38. The problem which has arisen in thise case stems from the failure of the draftsman of Form IV in the Companies (Forms) Regulations to produce a form which would cover a case clearly contemplated by the Ordinance although likely to occur very rarely, i.e. a case where a mortgage or charge on a company's property is neither created nor evidenced by an instrument.  (I shall hereinafter refer only to mortgages, since it is a mortgage which is in question). That it was appreciated there might be such a case is to be seen from the inclusion in s.80 of the Companies Ordinance of the words "if any". The unsuitability of the form for the present case obviously called for ingenuity on the part of the solicitors for the Bank when they sought to have their mortgage registered under Part III of the Ordinance. In effect we have to decide whether they rose to the occasion.

39. The object of Part III is to protect a liquidator and creditors of a company against unregistered mortgages. The duty of the Registrar of Companies to register mortgages arises under s.83, and it goes without saying that he can register only those mortgages of which he has the particulars which he is required to register, namely

As one would expect, the Registrar looks to the person applying for registration for the particulars he requires - in this case the creditor Bank.

40. Where a mortgage is created or evidenced by an instrument, the applicant need only enter in the first column of Form IV the date and description of the instrument, and the Registrar will have little difficulty in identifying the particulars which he is required to register. The solicitors here used their own printed version of Form IV, which had a horizontal format instead of the vertical format prescribed by the Regulations.   Nothing turns upon that, but I mention it because I shall use the term "column" although it may not be entirely appropriate in relation to this version of the form. In column 1 the solicitors entered:

From that the Registrar might reasonably conclude -

When he perused the letters, it immediately became obvious to him that a reference to a single mortgage created on or before 6th January 1982 was not intended. Even if the peculiar order of dates had alerted him to the fact that the 2nd, 3rd, 4th and 5th letters were included solely because copies of them had been enclosed with the letter of "5th January 1983" and would not, in the event, be relied upon, he was not to know that the letter of 5th January 1983 ought to have been dated "5th January 1984" and was therefore written only shortly before the last three letters (that of the 11th January 1984 and the two of the 13th January 1984). Hunter, J. took the view that the Registrar ought nevertheless to have deduced from all the letters that what was intended to be registered was "an equitable charge on the terms of [the letter of the 13th January 1984 from the Bank] perfected by deposit of Title Deeds by 13th January 1985" for this was "tolerably clear". (It is common ground that he must have meant "by 13th January 1984").  Hard as I have tried, I have been unable to see that such a mortgage was particularised by the letters or any of them: it seems to me, with respect, that it would have been mere conjecture for the Registrar to infer such a mortgage from those letters. Indeed, Mr. Eddis (Counsel for the Bank) has from time to time in the course of the two and a half days of argument before us suggested that various mortgages were intended and finally advanced the contention that there were three separate mortgages to be registered, namely equitable mortgages by deposit of title deeds on 6th, 12th and 14th January 1984 (the dates on which the last three letters listed would have been received in the normal course of post). Those mortgages, he submits, were created by the deposits of deeds with a view to the preparation of a legal sub-mortgage to secure an existing advance against the Bank's promise to forbear suing for repayment of that advance.

41. The main thrust of the argument on behalf of the Bank then becomes this, that the following facts appeared from the eight letters listed in Form IV:

Assuming for the moment that those facts were to be extracted from the letters, were they submitted as "particulars of" a mortgage or mortgages? The judge said:

I would agree-but only subject to the proviso that the nature of the mortgage which was being particularised was clear and that the surplus information did not mislead the Registrar as to what that charge was. I accept that one must assume that the Registrar will use his common sense when perusing the papers submitted to him, but he is to read the papers and not the mind of the person submitting them.  That the Registrar was in fact unable to extract the material particulars and to decide what mortgage or mortgages to enter upon the register would not have availed him if he ought to have been able to do so. As I have indicated, I think the Registrar was grossly misled and could not reasonably be expected to divine what the Bank was asking to be registered. His letter of 23rd January 1984 shows that he understood that he was concerned with a charge created or evidenced by the letters listed: he pointed out that s:80 therefore required the submission of original documents. Nevertheless he was unable to identify the mortgage or mortgages and said that he could not see how any but the last letter (that of 13th January 1984 from the Bank to the company) could have created any mortgage and he asked for an explanation how any charge which might have been created by the other letters could have been created five weeks or less before the date of submission of the request for registration. He thought even the Bank's letter of 13th January 1984 did not create a mortgage unless confirmed by the company, and he again pointed out that, if it did, the document submitted was only a copy and not the original letter.  The Registrar ended with a reminder that, even on the assumption that a mortgage was created on 13th January 1984, the time for delivering particulars would expire on 18th February 1984.

42. Mr. Eddis conceded that up to this point the Registrar acted reasonably and that no blame attached to him for not doing what the Court is now asked to compel him to do. For my part I cannot see what more he could possibly have done. The 18th February came and went and nothing more had been heard from the solicitors for the Bank.  Not until 14th March did they reply, but Mr. Eddis says the expiry of the five-week period was immaterial, because the letter of 14th March was merely "explanation" and not further "particulars": the necessary particulars had been delivered in January.  I think the Registrar's letter of 23rd January 1984 may have recognised that such a distinction could in some circumstances properly be drawn, because, in relation to possible mortgages before the 13th January 1984, he said:

Be that as it may, I accept that, if the Registrar upon receipt of an "explanation" outside the five-week period were able to say, "Yes: now I see what charge you are asking me to register and I acknowledge that I ought to have been able to see that before", he would be under a duty to register the charge despite the expiry of the period.

43. That is not the situation here. The solicitors' letter of 14th March 1984 showed that even they were confused. Ignoring the fact that they repeatedly asked for registration of letters, when the Ordinance provides only for the registration of charges, we find them now saying that there were several equitable sub-mortgages, the precise number not being specified. That in itself was not consistent with the conclusion of the judge in the Court below。  The letter goes on: "The equitable sub-mortgages are created in any one of the following two manners", and there follow two sub-paragraphs. It should be observed that what the Registrar needed was not an explanation of how the mortgages were created but particulars of the mortgages so created. Had that been appreciated the solicitors might have avoided further confusion. The first sub-paragraph set out what I will call the Keys v. Williams manner of creating an equitable mortgage. In that case Lord Abinger said obiter at (1838) 3 Y & C Ex. 55, 62:

I will adopt that as being a correct statement of the law, but the explanation given by the solicitors still did not indicate to the Registrar how many equitable sub-mortgages he was being asked to register. Had the letter stopped at the end of the first sub-paragraph, the case for the Bank might have been stronger, although even then I do not see how the Registrar could have been expected to identify three separate equitable mortgages from the information given to him in January. The letter did not stop there: it went on to suggest an alternative manner in which the equitable mortgages might have been created, and that involved deposit of title deeds "pursuant to the same agreement in (a)". The only agreement referred to in that first sub-paragraph was an agreement to create a legal sub-mortgage. It was then said that three of the letters "show that the deposit was intended to be by way of security in respect of sub-mortgages". They showed no such thing: they showed only that the several deposits were for the preparation of a legal sub-mortgage.

44. The Registrar's reply of 19th March 1984 revealed that the "explanation" had confused him only more. It would be unkind were we, who have had the advantage of a long argument, to blame him for this, although I think that the real difficulties were not those which he now saw. The solicitors were still apparently placing great reliance upon four of the letters originally listed in Form IV, and not unnaturally the Registrar was misled into thinking that those letters were said in some way to evidence the equitable mortgages sought to be registered. Accordingly he required the originals. We are now able to see that, upon the hypothesis now advanced, what the solicitors should have said was: "Forget about the letters. The charges we want registered our three equitable mortgages dated 6th, 12th and 14th January 1984. They were created by deposit of title deeds in relation to properties A and B on 6th January, of title deeds in relation to properties C and D on 12th January and of the title deeds in relation to properties E and F on 14th January. The amount secured by all three mortgages was the same sum of $1,000,000 already advanced by the Bank and in respect of which there was an agreement that we should prepare a legal sub-mortgage." They might have added: "The three equitable mortgages were not created or evidenced by the letters which we previously submitted, but you will find in those letters evidence of some of the facts upon which we rely as creating the mortgages".

45. I have suggested that this is what the solicitors should have said. They should have said this within the five-week period, because in my view only by addressing the Registrar in this way would they be delivering "particulars of the mortgages" for registration in the manner contemplated by the Ordinance, as required by s.80(1).   Previously they had given the information - but not as particulars of the charges - and that was not what the Ordinance demanded.

46. It was, in effect, contended that the inadequacy of Form IV could be relied upon and that the Bank would have been within its rights to enter the word "nil" in column 1, whereupon it would still have supplied all the "prescribed particulars"， since reg. 2 of the Companies (Forms) Regulations provides that the particulars contained in the form "are hereby prescribed as the particulars required under the Ordinance". Hunter, J. implicitly accepted that argument and said:

I appreciate the force of this, but I cannot help feeling that the benevolence should have been directed towards achieving the objects of the statute and, therefore, in the direction of the Registrar.

I reject the contention that the Bank had done all that was required of it because the whole purpose of Form IV was clearly to give the Registrar the particulars he required for the purposes of s.83(1)(b) and the form had to be used "with such variations and additions as the circumstances of the particular case [might] require". The circumstances of this case required that the heading to column 1 should be varied by deleting the words "instrument creating or evidencing the", so that the particulars required would be "date and description of the mortgage or charge". Had the Bank in fact adopted a strict interpretation of the form and entered "nil" in column 1, it is just possible that the problem which has faced us would never have arisen: the Registrar would immediately have asked to be informed what charge he was being asked to register. The reply might have been in the same confused terms as the solicitors' letter of 14th March 1984, but equally it is just possible that proper particulars would have been given.

47. In the event it is unnecessary to discuss the meaning of the word "instrument" in Form IV and I say only that I have not the slightest doubt that, for the purposes of this Part of the Companies Ordinance, it includes any document (however informal) which evidences a mortgage or charge, although generally one might expect the word to be used only where the document creates or transfers some legal right.

48. There is then the objection to the form of these proceedings, which was raised for the first time in this Court, namely that mandamus does not lie to compel the Registrar of Companies to register a mortgage of which he has been given proper particulars. Again it is unnecessary to decide the point, but since, if valid, it would have been a complete answer to the application and raises an important principle, I think it right to add a few words on the subject. Mr. Feenstra argues on behalf of the Registrar that The Queen v. Registrar of Companies Ex parte Esal (Commodities) Ltd. (so far unreported) lays down that mandamus does not lie in such a case as this. What that case in fact decided was that, where the Registrar has registered a charge and given his certificate, that certificate is conclusive and cannot be challenged. That was so even though the Registrar had acted without jurisdiction. It is here said that, if the decision of the Registrar to issue a certificate was not open to challenge, so must be a decision by him not to issue a certificate. I do not think that follows. The Esal Case was based upon the conclusiveness of the certificate, a factor which cannot exist where there is no certificate. Undoubtedly the courts would have jurisdiction to compel the Registrar to consider an application for registration if he declined to do so, but equally I think they could compel him to register a charge if it were shown that he had received particulars which ought to have been registered under s.83. This was not such a case.

49. Finally, the judge added that he would have been prepared, if necessary, to extend the time for registration in this case under the powers granted by s.86, although he did not deal with this aspect in detail. Mr. Fenstra submits that, in the absence of any allegation of fraud, it would have been wrong to exercise that power in a case where the company had gone into liquidation, and he relies upon a passage in the judgment of Lord Brightman in In re Ashpurton Estates 1983 1 Ch. 110. Having referred to the practice of inserting in any order extending the time for registration some such words as "but that this order be without prejudice to the rights of parties acquired prior to the time when the debentures shall be actually registered", the judge said at p. 124A:

Mr. Eddis has not sought to argue to the contrary. The present case, also, does not fall into the category of fraud and I think it would have been wrong to extend the time.

50. However, for the reasons I have given I would allow the appeal and set aside the order for mandamus which was made.

Fuad, J. A.:

51. I agree that the appeal should be allowed and there is nothing I can usefully add to what has already been said.

Sir Alan Huggins, V.-P.:

52. We are agreed that there should be an order nisi that the Appellant have the costs of this appeal.

(1)    English Court of Appeal, unreported 29th July 1985

(2)    [1908] 1 Ch. 152

(3)    [1971] Ch. 442

(4)    [1899] 81 Ch. D. 147

(5)    [1985] 2 W. L. R. 447 at 465

(6)    4th edition, Vol. 32, Para. 430

(7)    (1838) 3 Y & C Ex 55 at 61