HCB 1174/2023
[2024] HKCFI 2232
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
BANKRUPTCY PROCEEDINGS NO 1174 OF 2023
________________________
BETWEEN |
| | SECRETARY FOR JUSTICE | Petitioner |
| | and | |
| | 華德剛 | Debtor (Applicant) |
________________________
| Before: | Deputy High Court Judge Jonathan Wong in Chambers |
| Date of Hearing: | 13 June 2024 |
| Date of Decision: | 13 September 2024 |
________________________
DECISION
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1. Introduction
1.1 A bankruptcy order was made against the Applicant on 11 July 2023.
1.2 This is my decision on the Applicant’s application dated 22 April 2024 (“Application”) for an order under Section 480(1) of the Companies Ordinance Cap 622 (“CO”). It provides:
“ A person who is an undischarged bankrupt must not act as director of, or directly or indirectly take part or be concerned in the management of, a company, except with the leave of the Court by which the person was adjudged bankrupt.”
1.3 By the Application, the Applicant seeks leave to act as a director of Tak Wah Building Works Ltd (“Tak Wah”), but only for the purpose (“Purpose”) of representing Tak Wah in an intended appeal against the dismissal of Tak Wah’s claim in the Small Claims Tribunal (SCTC 22471/2022) (“SC Proceedings”) on 12 December 2023.
1.4 At the hearing, the Applicant appeared in person. The attendance of the Official Receiver (“OR”) was excused[1]. By a letter dated 6 June 2024, the OR informed the court that she takes a neutral position on the Application and would leave to the court as to the appropriate order to be made in the circumstances of the present case. However, the OR has helpfully provided her observations[2] to assist the court.
2. The SC Proceedings
2.1 The SC Proceedings were commenced by Tak Wah’s Form 2 filed on 5 August 2022. The Defendant named was the Commissioner of Inland Revenue (“CIR”). The SC Proceedings were commenced before Applicant was made bankrupt.
2.2 According to the Form 2:
(1) Tak Wah was incorporated in March 2008 but was dormant between 2010 to 2022;
(2) In April or May 2022, Tak Wah applied for a business registration certificate, but was told by a letter from the Inland Revenue Department dated 16 May 2022 that Tak Wah’s application was not acceptable for the reason that it had to settle outstanding business registration fees for the years 2012 to 2022 in the total sum of HK$13,150 (“Past Fees”);
(3) The lack of a business registration certificate prevented Tak Wah from carrying on any profit-making activities;
(4) It is Tak Wah’s case that the CIR (1) had no power to use the Past Fees as a reason not to issue a business registration certificate and (2) did not act in accordance with Section 7(3) of the Business Registration Ordinance Cap 310[3]; and
(5) As a result, Tak Wah claimed loss of income as a project manager and a company secretary in the sum of HK$75,000 (ie the jurisdiction limit of the Small Claims Tribunal).
2.3 At the hearing on 12 December 2023 (“Hearing”), the learned Adjudicator dealt with a number of issues. One of the issues dealt with was whether the Applicant could represent Tak Wah, as the learned Adjudicator had been informed prior to the Hearing by the OR that a bankruptcy order had been made against the Applicant and the Applicant therefore could no longer act as Tak Wah’s director. Notwithstanding his agreement with the OR’s position, the learned Adjudicator took into account the submissions made by the Applicant for Tak Wah on the substantive issues.
2.4 The more pertinent issue which the learned Adjudicator dealt with was the Defendant’s application to dismiss Tak Wah’s claim pursuant to Section 25 of the Small Claims Tribunal Ordinance Cap 388 (“SCTO”)[4].
2.5 I have perused the transcripts of the Hearing. Having considered the materials before him, including the submissions made by the Applicant, the learned Adjudicator concluded that Tak Wah’s claim was not within the jurisdiction of the Tribunal. Section 5 of the SCTO provides that the Tribunal shall have jurisdiction to hear and determine the claims specified in the Schedule of SCTO. The Schedule, in turn, provides that the jurisdiction of the Tribunal includes “Any monetary claim founded in contract, quasi-contract or tort where the amount claimed is not more than $75,000, whether on balance of account or otherwise”.
2.6 As the learned Adjudicator concluded that Tak Wah’s claim was not founded in contract, quasi-contract or tort, he dismissed Tak Wah’s claim pursuant to Section 25 of the SCTO.
3. The Application
3.1 The Applicant has filed 2 affidavits, respectively dated 12 April and 2 May 2024. The Applicant’s evidence does not seek to demonstrate that Tak Wah’s intended appeal is meritorious such that leave ought to be granted.
3.2 The OR makes the following observations.
3.3 First, she is of the view that the Application should be made by way of an originating summons instead of, as here, a summons. I am prepared to deal with the Application substantively despite the apparent procedural irregularity.
3.4 Secondly, the OR refers to Adams v Australian Securities and Investment Commission [2003] FCA 557. In that case, the applicant was convicted under section 86A of the Crimes Act 1914 and was disqualified under Corporations Act 2001 from managing corporations. An application was made under section 206G(1) of the Corporations Act 2001 for leave for him to manage 5 named corporations. It may be immediately pointed out that the applicant in Adams became disqualified from managing corporations as he was convicted of an offence involving dishonesty. The OR refers to Adams §8 which sets out the following propositions:
(1) The applicant bears the onus of establishing that the court should make an exception to the legislative policy underlying the prohibition;
(2) The legislative policy is one of protecting the public, not one of punishing the offender;
(3) An objective is to deter others from engaging in conduct of the particular kind in question;
(4) A further objective is the more general one of deterring others from abusing the corporate structure to the disadvantage of investors, shareholders and others dealing with a company;
(5) The prohibition itself contemplates that there will be hardship to the offender. Therefore, hardship to the offender alone is not a persuasive ground for the granting of leave;
(6) The court in exercising its discretion will have regard to the nature of the offence of which the applicant has been convicted, the nature of his involvement, and the general character of the applicant, including his conduct in the intervening period since he was removed from the board and from management. Where the applicant seeks leave to become a director and to take part in the management of particular companies the court will consider the structure of those companies, the nature of their businesses and the interests of their shareholders, creditors and employees. One matter to be considered will be the assessment of any risks to those persons or to the public which may appear to be involved in the applicant's assuming positions on the board or in management.
3.5 In my view, Adams is not very apposite to the present case since (1) it has not been suggested by the OR that the Applicant was convicted of an offence involving dishonesty and (2) where, as here, Tak Wah does not carry on any or any meaningful business and the Purpose is limited to pursuing the intended appeal, it seems to me that there is little, if any, concern of the need to protect the public. As noted at §1.4 above, were the OR of the opinion that the Application is contrary to the public interest, she is required to oppose the Application.
3.6 I think Adams was referred to by the OR because there appears to be a dearth of decided cases to provide guidance on how the discretion under Section 480(1) is to be exercised.
3.7 It seems to me axiomatic that the burden is on the Applicant to justify the Application. Where, as here, the Application is premised specifically and only upon the Purpose, it seems to me that an assessment of the Purpose would inform on how the court’s discretion is to be exercised.
3.8 Under Section 28(1)(a) of the SCTO, Tak Wah may only appeal on a ground involving a question of law alone[5]. In my view, the learned Adjudicator’s reasons for (1) concluding that the Tak Wah’s claim is not founded on contract, quasi-contract or tort and is therefore not within the jurisdiction of the Small Claims Tribunal and (2) consequently dismissing Tak Wah’s claim appear to me to be correct and the Applicant has not sought to persuade me otherwise.
3.9 Where the Purpose is, as here, illusory or futile, it seems to me that that is a weighty factor against the exercise of my discretion to grant leave under Section 480(1) of the CO.
4. Conclusion
4.1 For the above reasons, I dismiss the Application. I also make no order as to costs.
4.2 Should the Applicant require interpretation of this judgment into Chinese, he may approach my clerk to make prior appointment with a court interpreter for the same.
| | (Jonathan Wong)
Deputy High Court Judge |
Attendance of the Petitioner excused
The Debtor (the Applicant) appeared in person
Attendance of the Official Receiver excused
[1] Section 480(4) of the CO: “If the Official Receiver is of opinion that it is contrary to the public interest that an application under subsection (3) should be granted, the Official Receiver must attend the hearing of, and oppose the granting of, the application.”
[2] By reference to another letter to Master Hui dated 29 April 2024.
[3] “The Commissioner may by notice call upon any person who has carried on business, or carried on business at a branch, at any time during the 6 years immediately preceding the issue of the notice without being in possession of a valid business registration certificate or branch registration certificate (as the case may be) in respect of the business or branch, to pay by a date specified in the notice any fee or levy which would have been payable by him had the provisions of this Ordinance been complied with.”
[4] “The tribunal may at any time dismiss a claim which it considers to be frivolous or vexatious on such terms as to payment of costs as it may think fit.”
[5] Section 28(1)(b) has no application in the intended appeal.