Re Lee Yang, Shiu Chuen Joyce

HCMP 1054/2021

[2021] HKCFI 2468

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1054 OF 2021

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REASONS FOR JUDGMENT

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A. INTRODUCTION

1.This case raised an interesting and important question concerning the proper procedure to be adopted for an application under the Trustee Ordinance (Cap. 29) for a vesting order in respect of shares in a Hong Kong company held by overseas companies as trustees which have been dissolved.

2.By an ex parte originating summons issued on 23 July 2021, the Applicant seeks an Order that:

(a)    The right to transfer the shares registered in the name of Banque Paribas International Trustee Limited (known as BNP Paribas (BVI) Trust Corporation with effect from 8 July 2008) and Emmanuel Services Limited in Westminster International Limited (collectively, “the Subject Shares”) and the right to receive the dividends accrued or to accrue thereon prior to the transfer of the Subject Shares be vested in the Applicant;

(b)  The Applicant may thereafter transfer the Subject Shares to herself or to any other person or entity as the Applicant may desire;

(c)    Such further or other relief as the Court thinks fit; and

(d)  there be no order as to costs.

B.  THE FACTS

3.The material facts, which have been set out in the Applicant’s affirmation, may be summarized as follows.

4.Westminster International Limited (“WIL”) is a private company incorporated in Hong Kong on 24 August 1995.

5.According to the latest Annual Return of WIL made up to 24 August 2020, there are two shareholders, namely, Banque Paribas International Trustee Limited (“BPITL”) and Emmanuel Services Limited (“ESL”). Each of them holds 1 ordinary share. There are two directors, namely, Yang Shum Yuk Sin and the Applicant. Yang Shum Yuk Sin is the Applicant’s mother. The Company Secretary, Lee Shu Fa Kenneth (“Lee”), is her husband.

6.BPITL was a company incorporated in the BVI on 6 September 1994. It was registered as a non-Hong Kong company under the then Part XI of the Companies Ordinance. ESL was also a company incorporated in the BVI.

7.Lee suggested to the Applicant to use WIL as a corporate vehicle to hold a property known as Flat A, 35/F, Tower 4, and car parking space no. 18 on level LG2, Dynasty Court, No. 23 Old Peak Road, Hong Kong (“the Property”). He also advised her to engage BPITL and ESL to provide nominee services to WIL. At the material time, they were companies belonging to the group headed by Banque Paribas; Lee was working in the asset management division serving the East Asia Region (except Japan) of Banque Paribas; and he was BPITL’s Managing Director and one of ESL’s directors.

8.WIL acquired the Property by an assignment dated 29 November 1995. The Property was stated as the address of the registered office of WIL in the latest Annual Return. The acquisition of the Property was entirely funded by the Applicant (including repayments of a loan secured by a mortgage of the Property which was discharged on 29 July 2006). WIL does not have any other asset.

9.The shares in WIL were transferred to BPITL and ESL on 9 November 1995. On the same day, each of them executed a declaration in virtually identical terms which provides that:

“We… hereby solemnly declare that we, as nominee, have no right of title nor interest in and to the share mentioned in the Schedule hereto and that we hold the said share in trust exclusively for the sole benefit and to the order of JOYCE SHIU CHUEN YANG LEE care of 17^th Floor, Edinburgh Tower, 15 Queen’s Road Central, Hong Kong.

We further declare that we shall account to the said JOYCE SHIU CHUEN YANG LEE for all dividends or other monies arising thereof.”

The schedules refer to the shares in WIL.

10.On 8 July 2008, BPITL changed its name to BNP Paribas (BVI) Trust Corporation (“BNP Trust”).

11.Recently, the Applicant discovered from Lee’s former colleague that BNP Trust and ESL had already been dissolved. As to BNP Trust, there is a Certificate of Dissolution issued by the Registrar of Corporate Affairs, BVI, that it was dissolved on 17 December 2015. As to ESL, there is a Certificate of Dissolution issued by the Registrar of Corporate Affairs, BVI, that it was dissolved on 25 November 2013.

12.In the circumstances, the two trustees holding the Subject Shares on trust for the Applicant have been dissolved and are no longer in existence.

C.  ANALYSIS

13.Section 52(1)(b)(iii) of the Trustee Ordinance (Cap. 29) (“TO”) provides that:

“In any of the following cases, namely…where a trustee entitled, whether by way of mortgage or otherwise, alone or jointly with another person to stock … cannot be found, or, being a corporation, has been dissolved…the court may make an order vesting the right to transfer or call for a transfer of stock, or to receive the dividends or income thereof, or to sue for or recover the thing in action, in any such person as the court may appoint…”

14.Section 57(1) of the TO provides that:

“An order under this Ordinance… concerning any stock…may be made on the application of any person beneficially interested in the … stock…”

Since the Applicant is the sole beneficiary of the Subject Shares, she has the locus standi to apply for a vesting order.

15.Although the court has a wide discretion under section 52 as to whether to make a vesting order, it only has jurisdiction to exercise that discretion in the specified cases (Orwin v Attorney General [1998] 2 BCLC 693 at 702a-b). To have jurisdiction in this case, the court has to be satisfied that this is a case of trust of the Subject Shares, that BNP Trust and ESL were the trustees, they have been dissolved and the Applicant is the beneficiary.

16.There is indisputable documentary evidence that both BNP Trust and ESL held the Subject Shares on trust for the Applicant, and that they have been dissolved. I am satisfied that the preconditions prescribed by the said statutory provision have been satisfied. Once the preconditions have been satisfied, the court has the discretion to vest the property directly in the beneficiary rather than a new trustee (Wismettac Asian Foods, Inc. and United Top Properties Ltd and others [2020] HKCFI 1504, §46; Underhill & Hayton, Law Relating to Trusts and Trustees (19^th ed., 2016), §73.20, p 1056, fn. 12).

17.My concern was whether it was correct that this application was made ex parte.  In Wong Shuk Ying v AG [1987] HKLR 985, the first plaintiff applied for a vesting order in respect of certain property formerly owned by a dissolved company. Godfrey J (as he then was) held that the Attorney General was involved in cases of this sort in two capacities. First, he was involved as representing the Crown as the person to be divested of the property, whether or not it was asserted on behalf of the Crown that the property was bona vacantia. Secondly, he was involved in a separate capacity if it was sought to assert on behalf of the Crown that the property was bona vacantia. Even though the Crown in that case did not assert a claim to the property as bona vacantia, it remained necessary for the Attorney General to continue as a party in the first capacity. The learned Judge rejected the view that it was not necessary to join the Attorney General as a party in the first place.

18.In subsequent cases involving similar applications for vesting orders, the Attorney General (before China’s resumption of sovereignty over Hong Kong), or the Secretary for Justice (after China’s resumption of sovereignty over Hong Kong), was joined as the respondent (see Chan Ping Sang Johnny and another v Secretary for Justice [2017] 2 HKLRD 1082, and the precedents cited by Lisa Wong J at §8 of her judgment in that case). This is also the practice stated in Hong Kong Civil Procedure, vol. 1, §§102/5/59-102/5/60 at p 1702). The rationale is that the Secretary for Justice is joined as the respondent to represent the Government as the person to be divested of the property. This is because any property remaining in a dissolved company is deemed to be bona vacantia and passed to the Government.

19.Mr Ismail drew my attention to section 752(5) of the Companies Ordinance (Cap. 622) which provides that “a property or right held by the company on trust for any other person” has been excluded from the general provision under section 752(1) that “every property and right vested in or held on trust for the company immediately before the dissolution is vested in the Government as bona vacantia”. He submitted that, because of this statutory provision which came into effect on 3 March 2014, the practice stated above may no longer be applicable. I disagree. Sections 752(1) and (5) of the Companies Ordinance are substantially similar to section 654 of the Companies Act 1985, which provides that:

“When a company is dissolved, all property and rights whatsoever vested in or held on trust for the company immediately before its dissolution (including leasehold property, but not including property held by the company on trust for any other person) are deemed to be bona vacantia and… accordingly belong to the Crown…”

In Orwin v Attorney General [1998] 2 BCLC 693, the plaintiff claimed for a vesting order that the copyrights in some drawings produced by him during the time when he was an employee of the company, which had been dissolved, were held on trust by the company for him and that the copyrights were held upon trust by the Crown, but were not bona vacantia under section 654 of the Companies Act 1985. Mummery LJ remarked at p 696e that “That explains the joinder of the Attorney General as the defendant representing the interests of the Crown.” and more importantly at p 697c-d:

“The position of the Attorney General should also be explained. He is joined because the Crown is the residual owner of the legal estate, the property held in trust. His role, as Mr Cunningham explained, is more that of an amicus, though he is a party, than of a person making competing claims against the plaintiff. He does not oppose the making of the vesting order, so long as the court is satisfied that it is a proper case. The role of the Attorney General is to assist the court on the evidence and the law to ensure that an order is not made unless it is justified under the provisions of s 51.”

At p 699g, he held that:

“It is unnecessary to refer to any more provisions in the Companies Act 1985, since it is common ground that, if these copyrights are held on trust, the legal title and the trusteeship is in the Crown. It is not a case of bona vacantia.”

I take the view that it remains necessary to join the Secretary for Justice as the respondent in these circumstances. This is, however, not really relevant in this case because section 752 of the Companies Ordinance (Cap. 622) applies to Hong Kong companies only. BNP Trust and ESL were not Hong Kong companies.

20.The question of who should be joined as a respondent becomes more complicated if the company holding the trust property, which has been dissolved, is a foreign company. I take the view that it would depend on who has become the holder of the legal title to the property under the applicable law, which ought to be the law of the place where that company was incorporated. Foreign law is treated as a question of fact. The Applicant has not adduced any evidence on the relevant BVI law in this respect. However, I am aware that section 220(1) of the BVI Business Companies Act 2004 provides generally that “any property of a company that has not been disposed of at the date of the company’s dissolution vests in the Crown”. It would appear that, in principle, the Attorney General of BVI should be joined as the respondent representing the Crown as the person to be divested of the Subject Shares upon the dissolution of BNP Trust and ESL. It would have been necessary to seek leave to serve the originating summons out of the jurisdiction pursuant to Order 11, rule 9, Rules of the High Court (“RHC”).

21.Order 2, rule 1(1), RHC provides that:

“Where, in beginning or purporting to begin any proceedings or at any stage in the course of or in connection with any proceedings, there has, by reason of any thing done, or left undone, been a failure to comply with the requirement of these rules, whether in respect of time, place, manner, form or content or in any other respect, the failure shall be treated as an irregularity and shall not nullify the proceedings, any step taken in the proceedings, or any document, judgment or order therein.”

I took the view that the Applicant’s failure to join the Attorney General of BVI as the respondent, and commencement of these proceedings by an ex parte originating summons, were procedural irregularities which had not nullified the proceedings. The irregularities may be characterized as adopting an erroneous originating process and misjoinder. I also noted that Order 15, rule 6(1), RHC, provides that:

“No cause or matter shall be defeated by reason of the misjoinder or nonjoinder of any party; and the Court may in any cause or matter determine the issues or questions in dispute so far as they affect the rights and interests of the persons who are parties to the cause or matter.”

22.The court has a very wide discretion to decide how to deal with procedural irregularities under Order 2, rule 1(2), which includes waiving any such irregularities. Order 15, rule 6(1) also confers an unfettered discretion on the court though there are, of course, legal limits (Hong Kong Civil Procedure 2021, vol. 1, §15/6/1 at pp 380-382). In deciding how I should exercise the court’s discretion in this case, I bore in mind the underlying objectives of the RHC set out in Order 1A, rule 1, in particular, sub-rule (b) “to ensure that a case is dealt with as expeditiously as is reasonably practicable”, and sub-rule (c) “to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings”.

23.It is always a serious matter to deprive a proper party the chance to be heard. However, unlike usual contentious proceedings, the reason why it is necessary to join the Attorney General of BVI is simply because he has been holding the legal title to the Subject Shares upon the dissolution of the two trustee companies. There is indisputable and overwhelming evidence that the Applicant is the beneficiary of the Subject Shares. It is unthinkable that the Attorney General of BVI can or will claim any interest in the Subject Shares. Had he been joined as the respondent, it is most probable, if not virtually certain, that he would have no objection to the application, and elected not to take part in the Hong Kong proceedings.

24.In re Toyota Tsusho Corporation, HCMP2072/2011 (23 November 2011, unreported), the applicant applied for a vesting order in respect of some interest in land pursuant to section 45(b)(iii) of the Trustees Ordinance. The trustee company was incorporated under the laws of Japan, and had been dissolved. Suffiad J held at §11 of his judgment:

“I am therefore satisfied that under section 45(b)(iii) of the Trustees Ordinance, Kasho, being a corporation which had been dissolved, it would be in order for this application to proceed by way of an ex parte Originating Summons.”

It seems that the learned Judge’s attention had not been drawn to the line of authorities starting from Wong Shuk Ying v AG [1987] HKLR 985. Nevertheless, it could be said that it was not unprecedented that the court saw fit to make a vesting order on an ex parte basis in circumstances where the trustee company, which had been dissolved, was incorporated overseas.

25.Having regard to all relevant circumstances of this case, I was prepared to waive the said procedural irregularities, and grant a vesting order in favour of the Applicant on an ex parte basis. I wish to make it clear that my decision is not intended to relax the requirement of following the proper procedure as stated above. I appreciate that to follow the said procedure would entail both costs and time, which may appear to serve little practical purpose at the end of the day. However, there cannot and should not be any trade-off between expediency and the need to act in accordance with the law. In practice, there are ways to avoid, or minimize the time and costs to be incurred in, legal proceedings. First, insofar as possible, the beneficiary should of course procure the trustee company to transfer the legal title in the property in question back to him before the company is dissolved. Second, assuming that the legal title to the property in question is vested in the Government (whether in Hong Kong, or any other jurisdiction where the law is similar) upon the dissolution of the trustee company, the beneficiary may invite the Government to execute whatever documents, or take whatever steps, necessary to transfer the legal title to him voluntarily. If the evidence is clear, I would have thought that the Government would and should be willing to do so. And even if court proceedings become necessary, again, if the evidence is clear, it seems to me that the matter may be disposed of by a consent summons on paper.

D.  CONCLUSION

26.Under section 52(5) of the TO:

“The court may make declarations and give directions concerning the manner in which the right to transfer any stock of thing in action vested under the provisions of this Ordinance is to be exercised.”

27.For the above reasons, I made an order in terms of the Originating Summons save and except that, as requested by the Applicant, paragraph 3 thereof is replaced by “this Order be proof of the Applicant’s legal and beneficial ownership in the Subject Shares”.

Mr Justin Ismail, instructed by Woo Kwan Lee & Lo, for the Applicant