The Official Receiver v. Chow Tung Shan

HCMP 1334/2018

[2020] HKCFI 1139

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1334 OF 2018

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DECISION

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1.By a summons dated 8 May 2020 (“the summons”), Mr Chow applies for leave to appeal against my decision handed down on 30 October 2019 (“the Decision”)[1], and an extension of time to enable him to make the said application for leave to appeal. This decision should be read together with the Decision. For ease of reference, the abbreviations used in the Decision are adopted herein.

2.In the Decision, I refused to grant leave to Mr Chow to appeal the decision made by the Master on 18 July 2019 out of time.  I agreed with the Master that Ground 2 and Ground 3 put forward by the OR in support of the Disqualification Application against Mr Chow had been proved, and the disqualification period should be 1 year.  I took the view that the proposed appeal against the Master’s decision was without merit.  In the circumstances, I refused to give Mr Chow leave to appeal out of time. This is the decision targeted by the summons.  I have directed that the summons be determined on the papers without an oral hearing[2].  Mr Chow’s submissions in relation to the Summons are contained in his affidavits filed on 8 May 2020, 21 May 2020 & 4 June 2020.  The OR has provided his written submissions to the court on 28 May 2020. 

3.The principles concerning leave to appeal are trite.  Leave can only be granted if the appeal has a reasonable prospect of success (which means that the prospect of success is reasonable and more than fanciful, without having to be probable), or there is some other reason in the interests of justice why the appeal should be heard[3].  In respect of an appeal from an exercise of a discretion by the court below, the appeal would not be entertained unless it can be shown that the discretion was exercised under an error of law, in disregard of a principle, under a misapprehension of facts or the conclusion reached is outside the generous ambit within which a reasonable disagreement is possible[4].

4.In Mr Chow’s submissions, I have erred in my factual findings in relation to the MPF Contributions, and I have erred in construing s.168H and s.168I of the CWUO.  With respect, there is no merit in these submissions.

5.In respect of the MPF Contributions, I have set out my findings in [32] to [34] of the Decision.  The failure to pay MPF Contributions as set out in [32] of the Decision is supported by evidence and indisputable.  In fact, in his affidavit dated 8 May 2020 in support of the summons, Mr Chow does not deny the said failure.  Mr Chow is merely saying that he has taken steps to remedy the situation.  However, these remedial measures cannot be a defence to the Disqualification Application.  I have taken these remedial measures into account in considering the length of the disqualification period[5]. I am not satisfied that Mr Chow has put forward any argument showing that I may have erred in my ruling concerning the MPF Contributions.

6.Mr Chow argues that under s.168H, the alleged misconduct must be related to the winding-up of the company.  Further, under s.168I, a disqualification must be made in the public interest, and the OR must work hand-in-hand with the Liquidators in ascertaining the facts.

7.With respect to Mr Chow, I am of the view that Mr Chow cannot derive any assistance from these submissions.

(1)     S.168H provides:

“(1) The court shall make a disqualification order against a person in any case where, on an application under this section, it is satisfied—

(a) that he is or has been a director of a company which has at any time become insolvent whether while he was a director or subsequently; and

(b) that his conduct as a director of that company, either taken alone or taken together with his conduct as a director of any other company or companies, makes him unfit to be concerned in the management of a company.

(2) For the purposes of this section, a company becomes insolvent if—

(a) the company goes into liquidation at a time when its assets are insufficient for the payment of its debts and other liabilities and the expenses of the winding up; or

(b) a receiver of the company is appointed,

and references to a person’s conduct as a director of any company or companies include, where that company or any of those companies has become insolvent, that person’s conduct in relation to any matter connected with or arising out of the insolvency of that company.” (Emphasis added)

(2) As rightly submitted by Mr Julian Lam, counsel for the OR, there is no requirement in law that the grounds of “unfitness” must be connected with or arising out of the insolvency of the company. What has been said in s.168H(2) is merely that the relevant conduct “include … any matter connect with or arising out of the insolvency of that company”, and hence is not limited to such matters. This is put beyond doubt by Kwan J (as she then was) in Re Regal Motion Industries Ltd[6].

(3) S.168I provides:

“If it appears to—

(a)     the Financial Secretary; or

(b)     the Official Receiver,

that it is in the public interest that a disqualification order under section 168H should be made, an application for the making of such an order may be made by the Financial Secretary or the Official Receiver.”

(4)     The “public interest” in s.168I(1) has been explained by Kwan J (as she then was) in Re Peregrine Investments Holdings Ltd[7], in which she said that the public interest:

“lies in the protection of the public against persons acting as directors or shadow directors of companies who are unfit to do so, and that in turn involves ensuring, so far as possible, that disqualification orders of appropriate length are made in all cases which merit such orders and that they are made as speedily and economically as is reasonably practicable…” (quotation marks in the original text excluded)

(5)     The OR has put forward 4 grounds in support of the Disqualification Application.  From the OR’s point of view, the Disqualification Application was made in the public interest.  In making the disqualification order, I have borne the public interest element in mind[8].  Having considered the evidence, I ruled that Ground 2 and Ground 3 were proved and made the disqualification order.  The Disqualification Application made by the OR is meritorious.

(6)     As to the role of the Liquidators in this kind of applications, I have addressed the same in [24] to [26] of the Decision.  Mr Chow has put forward nothing to show that my analysis on the point is arguably wrong.

8.Mr Chow does not challenge my ruling on Ground 3 put forward by the OR.  Mr Chow also does not challenge the length of the disqualification period made in the Decision.  In fact, the 1-year disqualification period adopted by me in the Decision is the minimum length prescribed in s.168H(4).

9.In my view, Mr Chow has failed to show that his appeal against the Master’s decision has any merit.  It cannot be said that I erred in exercising my discretion in refusing to give Mr Chow leave to appeal against the Master’s decision out of time.  In turn, there is no merit in Mr Chow’s proposed appeal against my decision, which is a discretionary decision made by me.

10.There is no reasonable prospect of success in Mr Chow’s proposed appeal against my decision.  I also do not see any reason why in the interests of justice the appeal should be heard.  The application for leave to appeal is unmeritorious.  That being the case, there is no reason to grant leave to Mr Chow to make an application for leave to appeal against my decision out of time.

11.For these reasons, I dismiss the summons.  Costs should follow the event and be paid by Mr Chow to the OR forthwith.  Those costs be summarily assessed at HK$50,000.

12.I thank counsel for the assistance provided to the court.

Written submissions from Mr Julian Lam, instructed by the Official Receiver

Written submissions from the Respondent in person