The Official Receiver and Liquidator of Goldmann Commodities Ltd v. Choi Lup Tung and Others
Read the full judgment text of CACV 2/1983 on BabelCite. This Court of Appeal judgment.
1. This is an appeal from that part of an order made on the 27th November 1982 whereby the appellant was fined $600 (assessed at $20 a day for 30 days prior to the date of the Liquidator's summons hereinafter mentioned) and whereby his application for exemption from complying with Section 190(1) of the Companies Ordinance was dismissed and he was ordered to submit and verify or concur in submitting and verifying a Statement of Affairs within 6 months from the 27th November 1982.
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CACV000002/1983 IN THE COURT OF APPEAL
BETWEEN
____________ Coram: Hon. Leonard, V-P., Cons & Fuad, JJ.A. Date: 10th May, 1983. ___________ JUDGMENT ___________ Leonard, V-P. : 1. This is an appeal from that part of an order made on the 27th November 1982 whereby the appellant was fined $600 (assessed at $20 a day for 30 days prior to the date of the Liquidator's summons hereinafter mentioned) and whereby his application for exemption from complying with Section 190(1) of the Companies Ordinance was dismissed and he was ordered to submit and verify or concur in submitting and verifying a Statement of Affairs within 6 months from the 27th November 1982. 2. I must commence by pointing out that the order as perfected does not appear to be in accordance with the written judgment of the trial judge which was to the effect that liability of the appellant to submit and verify or to concur in the submission and verification of the Statement of Affairs should be limited. The expression used in the judgment is "insofar as the same relates to the period of his directorship". What was meant by this limitation I will discuss later. 3. Secondly, I must point out that the papers as presented to us were woefully inadequate and presented in a manner which made the issues involved extremely difficult to disentangle. There were 5 summonses dealt with by the order the subject of the appeal. In the first, that taken out by the Official Receiver, 4 respondents were named - Choi Lup Tung ("Choi"), Wong Kin Man (the appellant), Yeung Ki Yuen ("Yeung") and Wong Wai Man ("Wai Man"). This summons was dated the 9th July 1982 and was returnable on the 29th July 1982. It described the 4 respondents as "directors of the above named Company" and sought orders (1) that they "having without reasonable excuse made continuing default in complying with the provisions of Section 190(2) and Section 190(3) of the Ordinance be fined in accordance with Section 190(5) of the Ordinance and (2) that the above named directors produce a Statement of Affairs ... within such period as the Court shall deem proper, at their own expense, to include a detailed analysis of stocks held both by the Company on its own behalf and on behalf of any other person, including the aforementioned directors as at the relevant date". 4. It seems only common-sense to conclude from the wording of these prayers that the Official Receiver was seeking an order that each of the respondents should be fined and that each should join with the others in producing a Statement of Affairs. 5. We have not seen any summons taken out by Choi, Young or Wai Man. Presumably each was in a form similar to that taken out by the appellant. This was taken out on the 24th July 1982 and was also returnable on the 29th July 1982 and sought exemption from complying with Section 190(1). We do not know what happened on the 29th July 1982 nor on any subsequent adjourned hearing of the 5 summonses although I gather from what Mr. Allison for the Official Receiver told us that there were a number of adjournments and that Mr. Allison made a number of reports as Official Receiver to the trial judge as and when affidavits were filed by the appellant or Choi. I need not concern myself with Wai Man for he satisfied the trial judge that he was a director only in name. He co-operated with the Official Receiver who did not press the case as against him. He would, as far as I can determine, not come within the definition of "Director" in Section 2 of the Companies Ordinance in that he did not "occupy the position of Director" (See "Practice Notes" at page 550 21st Edition Palmer's Company Law). We do not have any record of any reports that may have been made by the Official Receiver to the Court at any of the hearings. In the jumble of papers placed before us under the euphemism "Appeal Bundle" there are 6 affidavits from the appellant dated respectively 7th July 1982; 10th June 1982; 27th July 1982; 28th July 1982; 3rd August 1982; and finally 3rd January 1983 this last in support of an application for leave to appeal out of time. There are 2 further affirmations of Choi dated respectively 4th June 1982 and 10th June 1982; an affidavit from the appellant's solicitor of the 7th June 1982; and an affidavit dated 12th June 1982 from Yeung's solicitor stating that Yeung was then out of the Colony. There are also a number of affidavits from Wai Man and an affidavit dated 5th August 1982 from law Kwok Hung, a certified Accountant. It will be noticed that a number of the affidavits to which I have referred were sworn and filed before the two summonses under which the order appealed against was made were issued. These affidavits were, we were told, filed in opposition to an earlier similar application by the Official Receiver which was dismissed. We do not have the earlier summons nor do we have the order made on it nor do we have the reasons for its apparent dismissal. All this has caused me great difficulty in determining what has occurred. It would have been of assistance to me had some form of chronology been submitted to us by either party but this was not done. Hence it is difficult to outline the facts with any certainty of accuracy. But the following facts do emerge either from the affidavits or from the judgment. 6. Goldmann Commodities (H. K.) Limited (the Company) was formed on 23rd November 1979 to deal in commodities. An order that it be compulsorily wound up was made effective from the 17th May 1981. We have not had sight of its Memorandum and Articles of 'Association. We do not know precisely what occurred between 17th May 1981 and the 2nd July 1981 but on that date a meeting was held at the office of the Official Receiver. In attendance were Yeung and the appellant (who were jointly represented by Edmund W.H. Chow & Co., Solicitors) and Choi. The Official Receiver became Liquidator and it was agreed that there should be no committee of inspection. The Official Liquidator pointed out that he had no books or records of the Company and Choi promised to try to find them. It was suggested to Choi that Yeung and the appellant "had practically left the Company already towards the end of 1980". Choi did not agree with this suggestion and said that he had received any letter of resignation. [We were informed that the Articles required the resignation of a director to be in writing.] Choi claimed that Yeung and the appellant "remained in the Company until the Company ceased operation in mid 1980". Yeung and the appellant said that they intended to appoint an accountant to prepare the Statement of Affairs. There was discussion as to how the accountant should be paid. The discussion was confirmed by a letter dated 3rd July 1981 from Edmund W.H. Chow & Co. to the Official Receiver which recorded that the Official Receiver agreed to extend Yeung and the appellant's time for the filing of the relevant Statement of Affairs and the reply to a questionnaire (in the nature of a Preliminary Examination) until 31st August 1981 "assuming that our clients were able to locate the whereabouts and to obtain access to the relevant books and records of the Company". The Official Receiver had heard nothing by the 31st August 1981 and on the 2nd September 1981 he sent a reminder to the solicitors for Yeung and the appellant. On the 1st October 1981 he wrote again referring to the delay pointing out that the Statement of Affairs and the Preliminary Examination were different things and said "I would like to have the Preliminary Examination first if not both" (Sic). On the 5th October 1981 the solicitors wrote to the appellant who by then was apparently associated with another Company called "Golden Bull Limited" a member of the Hong Kong Commodity Exchange. The solicitors said:
On the 9th October 1981 Charles C.L. Chow & Co., Chartered Accountants informed the Official Receiver that they had "just received instructions" to act, again for both Young and the appellant, "to assist them in the perparation of the Statement of Affairs and the questionnaire". They said "As we are now gathering information in preparing the said documents we should be grateful if you would grant our clients an extension in submitting the same to you to 15th November 1981." The Official Receiver agreed that the Statement of Affairs might be submitted on or before 15th November 1981 but required the Preliminary Examination to be completed on or before 27th October 1981. On the 19th November 1981 Charles C.L. Chow & Co. told the Official Receiver that the Statement of Affairs had already been drafted by them, that they were awaiting the final approval of Yeung (having presumably already obtained the final approval of their client, the appellant) and asking for "an extension for submitting the same to you to the 15th December 1981". That extension was granted. 7. On the 3rd December 1981 answers to the questionnaire by way of Private Examination were apparently submitted by the appellant. This is a remarkably reticent document. Almost all answers were qualified by such phrases as "I understand", "I think", "as far as I am aware". Many are not answered at all. Many were evaded. Thus, for example, question 7(1) which read
The answer to 7(ii) which asked for the names of the promoters is quite explicit.
Question 10 was "Give a complete list of the directors of the Company throughout its existence". It was answered 8. "10. I think it is as follows ..." (followed by the names and addresses of the same three gentlemen with the addition of the name and address of Wai Man). The answer "I can't remember" given to question 16
is quite remarkable as is the answer to Question 21 ("Has the Company made any loan to a director ..." "21. I don't know. But as far as I am concerned, the answer is negative" in the light of what the Official Receiver does know about loans to Directors. For between November 1979 and 29th March 1980 loans of $572,000 were made to Choi, of $838,000 to Yeung and $165,000 to Kamsley Traders Ltd. of which the appellant was also a director. 9. The answers to Question 65
from a man who has earlier said in answer to Question 10 that he was a director "throughout the existence" of the Company indicates irresponsibility although the phrase may have been taken as meaning "at any time during the existence" of the Company. To my mind, however, this document shows throughout a determination to be evasive. My impression was strengthened when we were told by the Official Receiver that Yeung had submitted answers in exactly the same terms. 10. On the 17th December 1981 Charles C.L. Chow & Co. told the Official Receiver that their client Yeung was still absent and requested another extension to 31st January 1982. Again the extension was forthcoming but the Official Receiver inquired "I shall be obliged if you can let us know what are the accounting records or documents in your custody for the preparation of the said Statement of Affairs". His not unjustifiable curiosity was unsatisfied. 11. On the 27th May 1982, the Official Receiver having issued summonses addressed to Yeung and the appellant, was informed by Edmund W.H. Chow & Co. that they had no further instructions to act for either Yeung or the appellant. 12. It was in connection with these summonses that the affidavits of June 1982 of which I have already given particulars were sworn. I turn to those affidavits. The first of them is Choi's affidavit of the 4th June 1982. He stated:
One might gather from this affidavit and from a letter of the 22nd October 1981 sent by Choi to the Official Receiver that if the books and accounts of the Company taken over by Kamsley Traders Ltd. and seized by the police on the arrest of Miss Rowena Wu were made available by the police the necessary Statement of Affairs might easily be prepared. A supplementary affidavit sworn by Choi on the 10th June 1982 to which is exhibited a copy of his Certificate of Identity giving particulars of his journeys claims that he never actively participated in the business of the Company nor of Kamsley Traders Ltd. but that Yeung had all along handled both of these businesses. He suggested that he had no idea of where the accounts were that his statement that they had been seized by the police was hearsay and deduction from the fact of the arrest and charging of Miss Rowena wu. 13. So much for the evidence of Choi. 14. The appellant himself swore affidavits filed on the 7th and 10th June 1982. The first of these indicated that he had been issued with only 2 of the 20,000 issued shares of the Company. His story was that in June 1979 he, Choi, Yeung and a Thai National took over a Bangkok Company, Oriental Commodities (Thailand) Ltd. ("Oriental") to trade as a broker in commodity futures. He owned half the shares in Oriental and Choi and Yeung one quarter each. The Thai was a mere nominee. The appellant was in charge of the day-to-day affairs of Oriental. In August 1979 he, Choi and Yeung agreed to form the Company in which they were to be directors and shareholders in equal shares. The Company was incorporated on 23rd November 1979 with Yeung as Chairman and the appellant and Choi as the other directors. The appellant did nothing in relation to the Company but left its affairs to Yeung and Choi the intention being that eventually Choi would be responsible for a similar company in Taiwan. The appellant travelled extensively. This he too sought to establish by reference to his Certificate of Identity. During the period between 18th June 1979 and 18th December, a period of 18 months, say 540 days he spent so far as I can make out 158 days out of the Colony so that he was in the Colony for over a year during that period of 18 months. The period between 23rd November 1979 and the end of March 1980 is perhaps of more relevance because he says he orally resigned at the end of March 1980 i.e. after a period of 128 days. During that period of 128 days he was absent from the Colony for 38 days. He had returned to the Colony after spending 16 days in Bangkok on the 23rd March 1980. He left again for Bangkok on the 29th March 1980 so that if the interview which he claims led to his resignation took place at the end of March it took place between the 23rd and the 29th. At that time, he claims, he discovered that he was registered as a shareholder of only 2 of the 20,000 issued shares (instead, presumably, of 660 shares). He remonstrated with Choi and Yeung at a "rowdy" meeting in the course of which "a fight almost broke out between Yeung and myself". He walked out of the meeting having orally tendered his resignation, formed his own Company Tactman Ltd. in May 1980 as a broker in commodity futures trading in Hong Kong. We are not told when he and Yeung smoked their pipe of peace but we do know that by June 1981 they were jointly instructing Edmund W.H. Chow & Co., Solicitors and Charles C. L. Chow & Co., Chartered Accountants with the results which I have already outlined. Hence I trustt I may be pardoned if I greet this version of events with some scepticism. He goes on to say "A few months after I had terminated my directorship with the Company I heard from other sources"(what other sources he does not deign to say) "that because of the legislative control, the Company had been unable to carry on trading and all its business had been transferred to a Kamsley Traders Limited ("Kamsley") controlled by Yeung." Somewhat coyly he omits to say at that stage that he himself was a director of Kamsley. In paragraphs 17 and 18 of this affidavit he says:
In further paragraphs he accepted that the ultimate responsibility of submitting the Statement of Affairs lay upon him blamed his solicitors and accountants and said:
15. On the 10th June 1982 he filed a supplementary affidavit in which he claimed that prior to his oral resignation Choi and Yeung were responsible for the management of the Company, that the books were kept by Rowena Wu who reported to Yeung but never to him, that he "read some of the books only once or twice", that after the row about the shares whenever he, Yeung and Choi were in touch, they never talked about business, let alone the business of the Company or the whereabouts of its books and documents. I find all this quite impossible to believe. Here we have a man, engaged in commodity brokerage, running a company in Bangkok with which Choi and Yeung were associated, joining with them in connection with a project in Taiwan, having a directorship in Kamsley in which Yeung was also concerned. He finds that to his mind at any rate he has been swindled out of a 1/3 share in the Company. He must have known that Rowena Wu had been arrested and that that the books or some of them had been seized in connection with her arrest. Having all this in mind it is impossible to believe that when he met them they never talked about business until after the first meeting with the Official Receiver. Only then, he suggests, did he ask Yeung where were the books and records of the Company. What follows is the ultimate in disingenuity "He told me that he had no knowledge of their whereabouts but Choi might know about them. He then suggested that we should instruct solicitors to act for us. I had no reason to disbelieve him" and later "I did not attempt to trace Choi again thinking that my professional advisers would be able to locate the Company's books and documents through Yeung who was in charge of the day-to-day affairs of the Company when I was its director and after I had ceased to be so." 16. This together with an affidavit from Yeung's solicitor to the effect that Yeung out of the Colony was the material which was before the judge when he refrained from imposing fines on Yeung and the appellant in June 1982. As we have seen the Official Receiver returned to the fray on the 9th July 1982 and the appellant took out a summons on the 24th July 1982 seeking exemption from complying with Section 190(1). In an affidavit of the 24th July the appellant persisted in his innocent ignorance. He apparently accepted the suggestions of Choi and Wai Man that they did not know the whereabouts of the books and accounts and said that he had asked Yeung by long distance telephone where they were to which he replied that he had no idea. He could not help the Official Receiver "Even if I have access to these books and records, which I am not entitled to after the resignation of my directorship" (an unrecorded oral resignation be it remembered) "I can only make a statement as to the affairs of the Company within the period of my directorship. Moreover, the books and records of the Company were not compiled by me during my term of office but by officers under the direct supervision of the other directors." 17. From an affidavit sworn by Wai Man on 27th July 1982 we learn that Choi had told him that about June 1980 all the clients of the Company were transferred to Kamsley and all the clients' deposits and clients' accounts were transferred to the books of accounts of Kamsley. Kamsley was suspended from trading and "all the clients of Kamsley and their accounts were transferred to a Company (Up-lot Ltd.) owned by a Mr. Kandy Kuk. Mr. Kandy Kuk told him that some of the books of Kamsley and of the Company had been seized by the Police that Kandy Kuk had retained some. 18. A supplementary affidavit dated 3rd August 1982 appears in the "appeal bundle". The jurat has been left blank but the body of it suggests that it was intended to be sworn by the appellant. I take it that it was so sworn and that the jurat was left blank on the copy in the bundle through carelessness. It tells us that Choi, Yeung and the appellant owned the Bangkok Company jointly; that from June until September 1979 he and Yeung supervised it, that in September 1979 Yeung left for Hong Kong to incorporate the Company and did not return to Bangkok. One would gather from this affidavit that thereafter until March 1980 Yeung was in Hong Kong while the appellant remained in Bangkok. But we know that this was not so from the appellant's Certificate of Identity. I have already given an indication as to the periods he spent outside Hong Kong. To be more particular, he left Hong Kong for Bangkok on 21st July 1979 and spent 34 days there before returning to Hong Kong on 25th August 1979 7n September 1979 he was away only for 4 days in Taiwan. Throughout October he was in Hong Kong. In November 1979 he was away for 4 days but again in Taiwan. In December 1979 he was away from Hong Kong for 6 days, 3 days in Taiwan and 3 days in Korea. In January 1980 he was away from Hong Kong for 4 days again in Taiwan. In February 1980 he was away for 4 days in Bangkok and 9 days in Japan. In March he went to Bangkok twice, the first time for 16 days from the 7th March 1980 to the 23rd March 1980. He went back to Bangkok on the 29th March 1980 for 11 days i.e. until 9th April 1980. He went to Bangkok for another 14 days in April 1980 for 20 days in May/June 1980 for another 3 days in June 1980 and another 3 days in July 1980 and another 8 days ending on the 4th August 1980. He did not go to Bangkok again in 1980. 19. These visits do not tie in with the tenor of paragraph 3 of this affidavit which reads:
Paragraph 4 does go some small way towards explaining why he did not talk business with Yeung and Choi when he met them after March 1980, in that he says they pulled out from the Bangkok Company at the end of March 1980. But he suggests that the table summarizing his travels abroad confirms that after March 1979 he spent most of his time in Bangkok. This is plainly untrue as I have indicated. In paragraph 7 of" this affidavit he acknowledges that no accounts of the Bangkok Company or of the Company were ever "taken" (whatever he may mean by that word) up to the time of his departure from the Company. In paragraph 8 he admits that because it was obvious that the Bangkok Company was not going to make a profit unless it changed its location they "never bothered much about its accounts". I find this an interesting side-light on this attitude to his duties as a director. It is tantamount to his saying "There is no need to keep an account unless a company is profitable." Such an attitude shows complete indifference to the plight of unfortunate creditors if the Company in question is forced to wind up. He never bothered much about the books of the Company either apparently. He had sight of the books once or twice but "had long forgotten their contents". As to Kamsley he has this to say:
Only when the order the subject of this appeal was made did the appellant consult an accountant to act for him alone. He instructed this accountant to inspect the documents in the possession of the Commercial Crime Bureau. The accountant ultimately advised him that it would be impossible for a Statement of Affairs to be compiled "based on the limited information appearing on the documents in the possession of the Bureau". The appellant conducted all conversations with the accountant by long distance telephone call. He did not go with his accountant to inspect the documents nor to assist him in understanding them. 20. It seems reasonably clear from the judgment appealed against that the trial judge visualised a single Statement of Affairs compiled jointly by the appellant, Choi and Yeung and that by the limitation "insofar as the same relates to the period of his directorship" he meant that the appellant should assist in preparing or verifying the statement in so far as it related to the formation of the Company and such matters as the loans to Choi, Yeung and Kamsley which occurred before his "resignation". on 29th March 1980. The judge clearly accepted (with a charity I would find it difficult to match) that his resignation took place some four months after the Company was formed i.e. on about 29th March 1980. 21. We are told (although we have not seen them) that the Articles of Association of the Company required notice in writing before a director could effectively resign and that at the date of the winding-up the appellant was still recorded as being a director. Notwithstanding the fact that the first summons taken out by the Official Receiver failed (presumably because the judge accepted that the appellant had not been adequately served by Edmund. W.H. Chow & Co.) the Official Receiver wrote to the directors on record on the 14th June 1982 pointing out that the duty to submit a satisfactory Statement of Affairs was a continuing one and that should failure to submit one continue, it would leave him with no alternative but to refer again to the Court. He had no choice but to do so. Even accepting that the appellant had no knowledge of the affairs of the Company after 29th March 1980 he should have had knowledge of events between November 1979 and that date in particular of the loans to Choi, Yeung and Kamsley. Mr. Allison conceded that he would not expect that the appellant could prepare a statement covering the whole period of the Company's life on his own, but suggested he could do so in conjunction with Choi and Yeung who have not appealed from the orders made against them and need only verify the accounts insofar as they covered the period up to the 29th March 1980. 22. Mr. Poon for the appellant suggested that this was s an improper approach basing himself on New Par Consols Ltd(1). and Columbian Gold Mines Ltd.(2)and on the relevant portions of Section 190 of the Companies Ordinance and Rule 39 of the Companies (Winding-up) Rules which read as follows:
Rule 39 of the Companies (Winding-up) Rules reads:
He pointed to the prescribed forms and argued that it would be impossible for his client to complete them. It would be impossible, for example, to supply the global figure for which the Statement of Affairs called. Mr. Allison countered this argument by pointing out that the Official Receiver had power to vary the relevant date from case to case and power to give special instructions if they were required. It would be possible for the appellant to complete form "O" for example. 23. Two questions appear to arise. Firstly was the judge correct in imposing a fine or did the appellant make default in complying with the requirements of the Section "without reasonable excuse"? Secondly should the appellant now be obliged to comply? As to the first, so far as I can glean the rights and habilities of the appellant qua director were not limited by the Articles or by the facts surrounding his appointment or the manner in which his duties should have been carried out as in the case of Wai Man. He was in no sense a "special", an "executive" or an "assistant" director. On his account the three of them he, Choi and Yeung agreed to set up the Company and each of them to be directors of it. By acceptance of the office of director the appellant accepted an office of trust and once he undertook it it was his duty to perform( it fully and entirely (see York and North Midland Ry. v. Hudson).(3) The Ordinance and in particular Section 190 imposes duties on directors and persons who accept that office must so order their affairs and their relationship with the Company and their fellow directors as to enable them to observe those duties as and when they arise. While directors are not liable for mere errors of judgment and not bound to give continuous attention to the affairs of the Company, and while their duties are of an "intermittent nature" by acceptance of office a director obliges himself to keep himself informed of the general progress of the Company as distinct from its day-to-day progress so that he will be able to afford it his assistance when that is reasonably required of him and so that he will be ready to observe any statutory obligation that may be imposed on him by reason of his position. Again while he may properly leave his duties or some of them to another director or official and be justified in trusting that other official, that trust must not be blind. Thus it was said in Land Credit Company of Ireland v. Fermoy (4) that it is a plea of guilty to say that funds were confided to other directors and misapplied by. them. That view may be extreme as is suggested at Page 575 of the 21st Ed. of Palmer's Company law but a director is certainly in breach of his duty if, when celled upon to observe a statutory duty all he can say is "I left everything to my fellow directors". A director is not entitled to take that stand; to permit him to do so would be to permit utter irresponsibility towards the Company and towards its creditors. I have no doubt that the appellant has made default in complying with the requirements of the Section and that he did so without reasonable excuse. Self-imposed ignorance is not a reasonable excuse. 24. The second question is more difficult. It may well be impossible for the appellant to comply with the Section now. My analysis of the affidavits indicates to me, however, that he has not shown that it will be impossible. Choi and Yeung have not appealed against the order obliging them to do so. The appellant's row with Yeung did not prevent him in the past from giving joint instructions to solicitors and accountants. There seems then little reason why he should not now associate with both Choi and Yeung in the preparation of the statement or why he should not make enquiries of such persons as Rowena Wu or Kandy Kuk to help him to do so. It is true that the Section is not penal in nature and that this Court should not oblige a person to do that which he cannot do but I am far from satisfied that the appellant cannot comply with the order made in the Court below and would dismiss the appeal. I would however give the appellant leave to apply to the Court below if he considers that he can satisfy that Court that he has made every possible effort to comply and is still unable to do so. Since the Official Receiver indicated to the Court his intention not to attend on the hearing of the appeal unless the Court desired him to do so I would make no order as to costs.
(1)(1898) 1 Q.B. 573 (2)(1894) 42 Weekly Reporter 624 (3) (1853) 16 Beav. 485. (4) (1869) L. R. 8 Eq. 7 at page 12. Cons, J.A. : 25. It is with some diffidence that I find myself at variance with my Lord the Vice-President, but I have ultimately come to the conclusion that the appeal should be allowed. In my view it is not correct to insist upon a formal, but from a practical point of view, useless compliance with the rules. With all respect to the learned judge below he was adopting only a literal approach when he said, "It has not been established that it is impossible to attempt at the preparation of a statement of affairs with the available documents". The affirmation of Mr. LAW Kwok-hung, a certified public accountant, was that he had inspected all the available documents and that in his opinion "it is difficult, if not impossible, to prepare a statement of affairs on behalf of the company. Even if a statement is prepared, it will hardly be reliable". He thought he might in time be able to produce a reasonable, reliable and detailed statement if he were provided with 17 other particular documents or series of documents which he then listed. So far as I am aware those documents have not yet been discovered and without them it seems to me that no useful result could be obtained. Practically speaking it is impossible to compile a Statement of Affairs. 26. It would seem moreover, although this was of course not before the trial judge, that since the hearing a further accountant has inspected at least some of the available documents and in his view it is not possible to compile therefrom a statement that would comply with the judge's order. It may have been better had an affidavit from that accountant been included in the appeal bundle, but I do not think any practical advantage is to be gained by adjourning the proceedings now. 27. I have every sympathy with the distaste obviously felt by the trial judge for Mr. David Wong's complete lack of concern over those likely to suffer financial loss by the untimely demise of the corporate being he had helped to create. I would endorse too my Lord's phrase of "utter irresponsibility". It may perhaps be that Mr. Wong is not immune from proceedings of some kind. I might even be permitted to venture the hope that he is not. Nevertheless as matters have come to stand, although the true circumstances did not become apparent until after the official receiver had reported to the Court, I am satisfied that Mr. Wong could not reasonably have been expected to file a statement. 28. I would therefore allow the appeal. 29. Since preparing the draft of this judgment my attention has been drawn in another connection to the case of In Re Bramblevale Ltd.(1). It seems to me that although the actual circumstances are not the same, there is some parallel to be drawn with the present case.
(1) [1969] 3 W.L.R. 699 Fuad, J. A. : 30. The background of this appeal appears sufficiently from the judgment of my brother Leonard V.-P. which I have had the advantage of reading in draft. I will say at once that the Official Receiver was fully justified, in all the circumstances, in requiring the appellant, amongst others, to submit and verify a statement as to the affairs of the Company in the exercise of his powers under s.190 of the Companies Ordinance. The issues before this court-can be stated quite simply : (i) did the appellant discharge the burden of establishing that he had a reasonable excuse for making default in complying with the Official Receiver's requirement, so as to relieve him of liability for the penalties provided for in subsection (5) of that section and (ii) was the Judge justified in making the order to submit and verify a Statement of Affairs? 31. As regards his involvement with the Company, the appellant, in his various affidavits, deposed that he was a registered shareholder of the Company holding two of its 20,000 issued shares of $100.00 each, and a former director thereof. In about October 1978, he had been a partner in a company in Bangkok, trading as a broker in commodity futures. He spent most of his time there. In June 1979, with his acquaintances Mr. Choi Lup Tang and Mr. Yeung Kai Yuen, and a Thai national, they took over another company in Bangkok called Oriental Commodities (Thailand) Limited for the purpose of trading as a broker in commodity futures. In accordance with Thai law, it was necessary for a Thai national to have at least 50 per cent of equities in any Thai company. Although Oriental Commodities (Thailand) was owned between himself (50 per cent), Mr, Choi (25 percent) and Mr. Yeung (25 per cent), the Thai national acted as their nominee, holding 60 per cent of the shares. From the take-over of the Thai company, he had been in charge of its day-to-day affairs there as agreed between Mr. Choi, Mr. Yeung and himself. In early August 1979, Mr. Choi had come to Bangkok and told him that as a result of the impending closure of a commodity futures firm in Hong Kong, premises would be available so that the three of them (Mr. Choi, Mr. Yeung and himself) could form a company in Hong Kong, and eventually in Taiwan, carrying on the same business as the Thai company. All three agreed that they would form a limited company and take over these premises. Each would be a director, and a shareholder in equal shares, of the Hong Kong company. 32. The appellant deposed that the Company was incorporated oh the 23rd November 1979, the three of them becoming its directors, with Mr. Yeung as the Chairman. He had remained throughout the life of the Company in charge of the Bangkok business, leaving its affairs to Mr. Yeung and Mr. Choi with the intention that Mr. Choi would eventually be responsible for the Taiwan company once it had been set up. Except for the first shareholders' meeting at which Mr. Yeung had been nominated the Chairman of the Board, he had never attended any meeting of the Company. Between 1979 and 1980 he had been busy travelling back and forth between Hong Kong, Bangkok, Kuala Lumpur, Taiwan, Japan and Singapore, concerned with the business of the Bangkok company and had never participated in any active management of the Company up to the date of his resignation. He produced a number of documents and a schedule showing his travels in detail. When he returned to Hong Kong from Bangkok in March 1980 he had discovered that instead of being allotted one-third of the issued shares of the Company, he had been registered as a shareholder of only two of its shares. In the presence of Mr. Choi and Mr. Yeung he had expressed his disapproval of their conduct, as a result of which "a fight almost broke out" between Mr. Yeung and himself. At the end of the meeting he had orally tendered his resignation as a director of the Company which had immediately been accepted by the other two directors. In May 1980, he had formed his own company in Hong Kong to carry on the business of a broker in commodity futures and continued to run the Bangkok company until about November 1980. He had later heard from other sources that "because of the legislative control" the Company had been unable to carry on trading and all its business had been transferred to Kamsley Traders Limited controlled by Mr. Yeung. 33. The appellant further deposed that he had only come to know of the winding-up when he had been contacted by the Official Receiver and Liquidator of the Company to attend his office for a meeting, in June 1981. His affidavits explain in considerable detail what transpired at his interview with the Official Receiver, the efforts he made to obtain the, information necessary for him to prepare or concur in the submission of a statement of affairs, and the appointment by him (together with Mr. Yeung) of an accountant to prepare the statement. 34. About the books of account, the appellant swore that to the best of his knowledge and belief the books and records of the Company were kept by a Miss Rowena Woo who had been hired by Mr. Yeung. She had never reported to him. While he was a director he had had access to the books as a matter of right but he had read them only once or twice and he had long forgotten what books he had examined. He summarised his stand as follows : he was, and remained, unable to make any statement in relation to the affairs of the Company in compliance with s.190 of the Ordinance without an examination of its books and records. This was due to the fact that he had not run the day-to-day business of the Company whilst he had been a director and during that period all its books and records had been in the control of the other directors. Even if he now had access to the books and records he could only make a statement as to the affairs of the Company covering the period of his directorship. Moreover, the books and records of the Company were not compiled by him during his term of office but by officers under the direct supervision of the other directors. And so it would not be proper for him to verify the statement as to the affairs of the Company by affidavit or otherwise. 35. I have already said that the Official Receiver had ample grounds for making a requirement under s.190 as against the appellant. It seems that the appellant was still listed as a director at the date of the winding-up and no statement of affairs had been submitted; the Judge from whose decision this appeal is brought was not told of this and he accepted that the appellant had resigned his office in March 1980. Be that as ti may, the Judge held that"[the appellant] certainly can be required to verify the affairs of the company which relate back to these four months of operation or part of it" and so it does not really matter whether or not the appellant effectively resigned in March 1980. The Judge's Order was limited (although the formal order drawn up does not perhaps make this clear) to that period. The Judge's decision, it seems to me, essentially turned on his finding that the appellant "cannot in the circumstances be said to have done his reasonable best despite his 4 months' involvement. He could certainly have been more energetic." The Judge had earlier posed the question ''... has he done all he reasonably can in obtaining information and materials to enable him to submit and verify, in part, a Statement of Affairs?" 36. It is necessary to mention that none of the affidavits filed by other persons contradict anything deposed to by the appellant regarding the extent and duration of his involvement with the Company. In the face of the available evidence as it developed, can it be said that the appellant was possessed of sufficient information and materials about the affairs of the company during the first four months of its operations to enable him to contribute in a worthwhile way to the submission and verification of its statement of affairs? The appellant certainly did not conscientiously carry out his proper duties and functions as a director but, however reprehensible his conduct, this does not mean that he should be coerced into submitting and verifying a statement of affairs about which he had no personal knowledge. I think it is important to note the wording of the prescribed affidavit (in Form 23 in the Appendix to the Companies (Winding-up) Rules) -
The words I have emphasised must bb given due weight and are consistent with the object of s.190 of the Ordinance which is "to get at the persons who have the information which the court requires for the purposes of the winding-up" (per Lord Russell of Killowen C. J. in In re New Par Consols Ltd., [1998] 1 Q.B. 573). Personal knowledge is required and a person who could only swear "to the best of my information and belief" is not a proper deponent for the purposes of the Ordinance and the Rules. If (as I think must be accepted) the appellant's story were true his participation in the affairs of the Company could not, in my judgment, have provided him with the necessary knowledge to contribute to, or verify, any part of the Company's statement of affairs, and on this ground I would allow the appeal.
Representation: Mr. C.H. Allison, Official Receiver, for Applicant. Mr. Winston Peon (Woo, Kwan, Lee & Lo) for 2nd Respondent. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||