RE TUNG FUNG HONG FORWARDING AGENTS LTD

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RULING

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1. In this case I have been requested to make a ruling upon the requirements for service of a statutory demand under Section 178(a) of the Companies Ordinance.

2. On the 12th June 1984 a creditors petition was filed by the petitioner Gomme Investment Co. Ltd. against Tung Fung Hong Forwarding Agents Ltd. (the company) on the grounds that the company is insolvent and unable to pay its debts and that it is just and equitable. The petitioner claimed the sum of $2,083,500 under a judgment dated the 23rd June 1983 which remains outstanding despite applications made for payment.

3. By paragraph 7 of the petition the petitioner avers that through their solicitors they gave a notice of demand for payment of the judgment debt pursuant to Section 178(a) of the Companies Ordinance, but the company failed to make any payment. However, the manner of service was not stated. Section 178(a) provides: -

Mr. Robertson who appeared on behalf of the Official Receiver submitted that the procedure prescribed by the section had not been strictly complied with for the notice of demand had not been served by leaving it at the registered office of the company. He cited two Australian cases, Re Alpina Pty Ltd. (1977) 2 A.C.L.R. 331 and Re Willes Trading Rty. Ltd. and The Companies Act (1978) 3 A.C.L.P. 582 which held that strict compliance was required for service of a notice of demand pursuant to Section 222(2)(a) of the Australian Companies Act which is in similar terms to Section 178(a). Weedham J. in his judgment in Re Willes Trading Pty. Ltd. had this to say on page 583.

"        Section 222(2)(a) creates, in favour of a person who claims to be a creditor of a company, a very convenient and simple method of proving what is sometimes a very difficult issue to establish namely, that a company is unable to pay its debts. If the notice is served in the correct manner, that is by serving it at the registered office of the company, and it requires the company to pay the debt or the sum said to be due, and the company for three weeks thereafter neglects to pay the sum or to secure it, then it seems to me that the presumption which arises is not a rebuttable presumption. The company is deemed to be unable to pay its debts.

        It would seem that the company would not then, so far as the ground of the petition is concerned, be able to dispute the fact, deemed by the occurrence of the events set out in sub-s (2) that it was unable to pay its debts. As the statute gives a person who claims to be a creditor this considerable right of serving a notice and having the company deemed to be unable to pay its debts by its failure to pay the sum due, it seems to me it places upon the alleged creditor a responsibility to comply entirely with the provisions of the section.

        The deeming effect of the notice, in my opinion, arises only if the notice is in full compliance with the conditions set out in the section itself. In this case it has not and that is a fatal flaw in the petitioner's case.".

4. Having regard to the serious consequences that can arise from a failure to comply with a notice of demand I am of the opinion that there must be strict compliance with Section 178(a). I would therefore respectfully follow the Australian authorities.

5. A notice of demand may be served upon the company either by registered or ordinary post sent to the registered office, or by personal service at the registered office upon a person authorised to accept service, or by leaving it at the registered office. If the door of the registered office is locked the notice can be placed under the door.

6. In order to comply with the requirements of Section 178(a) details of the mode of service of the notice should be set out in the petition.