The Joint and Several Liquidators of Days International Ltd (in Liquidation) v. Mahesh Nanik Dayaram
Read the full judgment text of HCCW 298/2011 on BabelCite. This High Court CFI judgment was delivered on 16 December 2021.
1. On 8 and 10 March 2017 the Liquidators of Days International Limited and Days Impex Limited (“ Companies ”) issued summonses in the respective winding up proceedings of these two Companies seeking the following relief pursuant to sections 275 and 276 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) (“ Ordinance ”):
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HCCW 298/2011 & HCCW 299/2011 [2021] HKCFI 3763 HCCW 298/2011 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES WINDING-UP PROCEEDINGS NO 298 OF 2011 ____________________
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IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMPANIES WINDING-UP PROCEEDINGS NO 299 OF 2011 ____________________
_________________ D E C I S I O N _________________ 1.On 8 and 10 March 2017 the Liquidators of Days International Limited and Days Impex Limited (“Companies”) issued summonses in the respective winding up proceedings of these two Companies seeking the following relief pursuant to sections 275 and 276 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) (“Ordinance”):
2.The Respondent issued on 22 July 2021 summonses in both proceedings (“Disposal Summonses”). The Respondent seeks the determination of preliminary issues with a view to striking out the Liquidators’ applications on the grounds that the Liquidators have failed to establish that the Respondent was a director or an officer of the Companies. 3.It would appear that the applications were issued because the Respondent has assumed that sections 275 and 276 apply only to directors or other office holders of a company. The reason for this is that the heading of section 275 reads as follows: “responsibility of directors for fraudulent trading” and section 276 is headed “power of court to assess damages against delinquent officer, etc”. 4.The body of the two sections, however, clearly extend the application of the provisions beyond that of individuals who are directors or what as a matter of conventional company law taxonomy would be described as officers of companies. Section 275(1) is in the following terms:
5.It is, in my opinion, therefore, quite clear that section 275, unlike the section, which it replaces, applies to persons other than directors. It clearly extends to any individual who was knowingly party to the carrying on of the business with an intent to defraud creditors or others or for any fraudulent purpose. The Respondent was not a de iure director (I ignore the question of whether it extends to a shadow director) of the Companies and assuming that he had to be in order for section 275 to be applicable, the Respondent would be correct that the claim against him under section 275 would be unsustainable. However, this is not the case. What his precise position was within the Company is in itself irrelevant. What is relevant is whether there was an intentional scheme or actions to defraud creditors or others and, if so, whether he was knowingly a party to it. My understanding was that by the end of the hearing the Respondent (who appeared in person) accepted that his original argument that presumed section 275 only applied to directors was probably wrong. The applications before me was to decide if there should be a preliminary issue to determine the applicability of section 275. Ordering the trial of a preliminary issue rather than all issues being dealt with together is exceptional[1]. Given the complexity of the claim under section 275, it seems to me quite clear that it is not suitable for determination separately and in advance of a trial of the entire application. 6.Section 276(1) and (1A) is worded differently:
7.Section 276(1) applies to any person who satisfies the definition of “officer”. Officer is defined in the section 2 of the Ordinance to include a director or manager of the company. “Manager” is also defined. It means a person, who is under the immediate authority of the board of directors and exercises managerial functions. 8.The Respondent argues that he was not a manager and, therefore, section 276 cannot apply to him. It seems to me that on the basis of the evidence that has been filed, that this is also not an issue suitable for determination as a preliminary issue. It is clear from the Respondent’s own evidence that he certainly had some managerial functions in the Companies, which he argues were controlled by his Father. The Respondent was also convicted of nine counts of conspiracy to defraud arising from the subject matter of the Liquidators’ claims. He and his Father’s appeal was dismissed. Leave to appeal to the Court of Final Appeal was also dismissed. In these circumstances it also seems to me clear that this claim is not suitable for determination in advance of a full trial. 9.I, therefore, dismiss the Respondent’s two Disposal Summonses. I will make a costs order nisi that the Respondent pays the Applicants’ costs forthwith with a certificate for counsel, such costs to be taxed if not agreed.
Mr David Chen, instructed by Stephenson Harwood, for the liquidators in both actions The respondent appeared in person [1] Mai Gou v Mak Chik Lun [2001] 3 HKLRD 248, 251 (Le Pichon JA). | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCCW 298/2011