LAU PAK FAI PETER AND ANOTHER v. JAPAN HOME CENTRE (MANAGEMENT) LTD

HCMP1650/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1650 OF 2013

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J U D G M E N T

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1.  There are four applications before this court for extension of time to comply with the requirements under s 122(1), (1A) and (2) of the Companies Ordinance, Cap 32 (“Ordinance”) in respect of the laying of company accounts at its AGM.

2.  It should be noted that the frequency of application of this kind is alarming.  Many of these applications were caused by ignorance on the part of the directors as to their obligations under the aforementioned statutory provisions (“Obligations”).  These cases are not dissimilar.  This reflects a somewhat cavalier attitude to the responsibilities of a director.  Such a position comes with various legal obligations.  It should not be overlooked that a failure to comply with the Obligations may attract criminal liability.

3.  These applications involve 4 companies – Japan Home Centre (Management) Ltd, JHC (International) Ltd, Japan Home Centre (HK) Ltd and Familj (China) Ltd (“Companies”).  The Companies were incorporated on respectively 16 May 1995, 17 May 2000, 16 May 1995 and 7 November 2011.  They are members of a group of companies which has been referred to as the Japan Home Group (“Group”).  The principal business of the Group is the retail sale of home-ware and household products under the trade name of [日本城].

4.  The Group is currently undergoing a restructuring exercise with the view to getting listed on the main board of the Hong Kong Stock Exchange.  In the course of performing due diligence as part of that exercise, the infringements in question (“Infringements”) were discovered. 

5.  With 1 exception, the directors of the Companies are Mr Lau Pak Fai Peter (“Lau”) and Ms Ngai Lai Ha (“Ngai”).  In respect of Familj (China) Ltd, there are 2 more directors in addition to Lau and Ngai, namely, Wu Jiang and Wei Li Hui.  The directors are the plaintiffs in these applications.

6.  None of the Companies appears today.

7.  The evidence before the court shows that, with the exception of Familj (China) Ltd, the Companies were largely owned and primarily managed by Lau and Ngai since their incorporation until late 2006.  In late 2006, the shares in these companies became solely owned by Matusadona Investments Ltd, which was and is 60% owned (via a corporate vehicle) and managed by Lau and Ngai. 

8.  As regards Familj (China) Ltd, 85.6% of its shares are owned by Japan Home Centre (Management) Ltd since its incorporation.  The constitution of its board of directors (see para 5 above) has not changed since its incorporation. 

9.  Under s 122(1), (1A) and (2) of the Ordinance, directors are required to lay a profit and loss account and a balance sheet before the company at its AGM and such documents shall be made up to a date not more than 9 months before the date of the meeting.  Under s 122(1B), the court has a discretion to grant an extension of time for the compliance of the Obligations.  The principles governing the exercise of such discretion are settled: see Re HKI Properties Ltd HCMP 2556/2007, unrep, 29 January 2008.

10.  In these cases, audited financial statements of the Companies were prepared and laid before the shareholders at various AGMs.  However, some of those exercises were carried out beyond the 9 month period stated above.  On the other hand, given the shareholding structure of the Companies and the fact that they were under the management of Lau and Ngai at all material times, I believe that the shareholders were aware of the financial position of the Companies and I am unable to see any prejudice caused to them as a result of the Infringements.

11.  Further, as stated above, the Infringements were caused by the ignorance of the directors.  I am satisfied that they were not intentional.

12.  Furthermore, I am satisfied on the evidence that there will be improvement over the corporate governance of the Companies by reason of various measures which will be put in place.  Lau and Ngai are now fully aware of their Obligations.  Hence, the risk of future non-compliance with the provisions of s 122 of the Ordinance is quite low.

13.  In the premises, I grant the order in terms of the draft order before me as amended.