Cheong Yip Finance (Hong Hong) Ltd v. Moscow Narodny Bank Ltd

CACV000090/1978

Winding-up - application for extension of time to file affidavit in opposition refused - winding-up order made - petition on ground that company unable to pay its debts - notice under s. 178 of Companies Ordinance - notice signed by solicitors for the creditors sufficient notice "under [their] hand" - affidavit verifying petition also sworn by a solicitor - deponent having no personal knowledge of facts - affidavit insufficient - evidence before Court of Appeal that company unable to pay its debts and that company ought to be wound up - winding-up order to stand.

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Coram: Huggins, J.A., Leonard and Cons, JJ.

Date of Judgment: 12 October 1979

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JUDGMENT

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Huggins, J.A.:

1. We dismissed this appeal and said we would give our reasons later.

2. The Appellants sought to have a winding up order set aside. The order was made upon a petition alleging that the company was unable to pay its debts and that it was just and equitable that the company should be wound up, it being further alleged that the company had been given statutory notice of two debts exceeding in total $13,000,000 and had failed to pay. The contributors had applied to oppose the petition but were out of time and after an adjournment to give them an opportunity to explain the delay Li, J. refused an extension of time. He considered the evidence and made the order appealed against.

3. The notice of appeal alleged two grounds of error, the second of which went to the existence of the alleged debts. At the commencement of the hearing we were told that this second ground would not be argued. The points in fact taken before us were technical in nature but were none the worse for that.

4. The grounds upon which a company may be ordered to be wound up are set out in s. 177 of the Companies Ordinance and, of course, include that the company is unable to pay its debts and that the court is of opinion that it is just and equitable that the company should be wound up. Section 178 goes on to provide that in specified circumstances a company shall be deemed to be unable to pay its debts, but that does not preclude actual proof that a company is unable to pay its debts. One of the circumstances specified is where a creditor to whom the company is indebted in a sum exceeding $5,000 has served a statutory notice and the company has for three weeks thereafter neglected to satisfy the creditor.

5. Rule 26 of the Companies (Winding Up) Rules then provides that every petition shall be verified by an affidavit which "shall be made ..., in case the petition is presented by a corporation, by some director, secretary or other principal officer thereof". In the present case the verifying affidavit was made by the solicitor to the petitioning corporation.

6. The main argument for the Appellants was that the affidavit purporting to verify the petition did not comply with r. 26 and that, in the absence of a proper affidavit, no winding up order could lawfully be made. In addition it was contended, secondly, that the statutory notice purporting to be served pursuant to s. 178 did not comply with the terms of that section in that it was not "under [the] hand" of the creditors and, thirdly, that without assistance from s. 178 the Petitioners could not discharge the burden of proving inability of the company to pay its debts.

7. The second of these contentions can be dealt with quite shortly. It was conceded that the notice was not under the hand of the petitioning bank: the petition itself alleged a notice under the hand of the Petitioners' solicitors. If the requirement that the notice shall be "under his hand" means that the petitioner himself must sign personally, this notice was bad. It would have been under the hand of the company if executed in accordance with s. 36: see 7 Halsbury (4th edition) 593 (999) note 5. A solicitor is not an officer within the meaning of that section. But in our judgment we were not compelled to hold that the Legislature intended to insist upon personal signature. What was required was that the debtor should receive a notice authorized by the creditor to the effect that the creditor alleged the debt and intended to petition for winding up if satisfaction was not given. The company could have been in no doubt that the notice in this case was duly authorized, for it was signed by a firm which stated that it was "Solicitors for Moscow Narodny Bank Ltd.". Whatever may be said about an affidavit under r. 26, we can see no reason why the Legislature should have intended to insist upon personal signature by the petitioner of a statutory notice. For the view that the words "under his hand" did not necessarily require personal signature we find some support in the view of Luxmoore, J. in In re Diptford Parish Lands 1934 1 Ch. 151 that a petition for appeal to be presented under s. 11 of the Charitable Trusts Act, 1869 under the hand of the appellant may be signed by the appellant's solicitor or other duly authorized agent. Mr. Buckley fairly pointed out that the appellant in that case was a parochial church council, which could not sign under its own hand. Moreover, he rightly submitted that, in so far as Luxmoore, J. held that an agent could sign for a party who was capable of signing, his decision was obiter. Nevertheless the learned judge did say:

"I think it is quite sufficient if an appellant signs the notice by his duly authorized agent" (emphasis supplied).

With respect we think this makes good sense and that the same principle was applicable in the present case.

8. The objection to the verifying affidavit was of greater weight. It was argued that the scheme of the Ordinance called for a deposition from someone with personal knowledge of the facts deposed. It was conceded that relaxation of the rule might be allowed in a proper case, where the deponent had at least as good knowledge of the facts as the petitioner would have. To that extent the rule was "merely directory": In re Africa Farms Ltd. 1906 1 Ch. 640. However, in general the rule must be strictly complied with: In re Vic Groves & Co. Ltd. 1964 1 W.L.R. 956. This affidavit was lacking in several respects:

The winding up of a company is no light matter and should be ordered only upon reliable evidence. In our opinion this affidavit was totally inadequate. The equivalent English rule was altered in 1967 and we do not find it necessary to comment upon the view expressed in Gore-Browne on Companies (43rd edition) 31-25 as to the possible effect of that amendment.

9. It was finally contended that, in any event, the judge had before him evidence which justified him in concluding that the company was unable to pay its debts. We do not think there was sufficient evidence even if it was legitimate for him to have regard to the affidavit of Wong Kim-chan, an affidavit which was not recited in the formal order dated 16th October 1978. We agree that there is no clear admission by Wong that the company was unable to pay its debts or that it had failed to pay a debt exceeding $5,000 in respect of which a statutory notice had been served: at most there was an admission that some unspecified amount was due and unpaid.

10. What ought we to do? We were asked to set aside the winding up order in spite of the problems which would result from the steps taken by the Official Receiver during the past eleven months. It was argued that the Petitioners, if so advised, should start afresh. The Official Receiver would then, if an order were duly made, have to resume the winding up from the point at which things then stood. Those were no doubt material considerations, but what seemed to us of much greater importance was the fact that if the judge had (as we think, rightly) come to the conclusion that the affidavit was insufficient, he would probably not have dismissed the petition but either have adjourned it or even granted it subject to the filing of a proper affidavit. The most, therefore, we thought the Appellants could expect was that we should either adjourn the appeal or dismiss it subject to the filing of a proper affidavit. However, in our judgment it would have been unduly legalistic in the circumstances which now obtained to insist upon a further affidavit even though Mr. Buckley had made good his objection to the verifying affidavit. We had the benefit of two reports from the Official Receiver and there was no doubt at all that this company was unable to pay its debts and ought to be wound up.

11. For these reasons we thought the appeal should be dismissed.

12th October 1979.