Re Frith Ltd

HCCW000278/1983

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Coram: The Honourable Mr. Justice Jones in Chambers.

Date of hearing: 5 July 1984

Dates of delivery of decision: 5 and 25 July 1984

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DECISION

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1. An order to wind up Frith Limited was made on the 19th December 1983 and the Official Receiver was appointed to be the liquidator.

2. On the 18th April 1984 an order was made on the application of the Official Receiver for the applicants, Mr. L.F. Sims, Mr. G.D. Oldham and Madam K.W. Sims former directors of the company and Mr. M.L.T. Sims who was described to be the chief operating officer responsible for the day to day running of the company to be examined pursuant to Section 222(1) of the Companies Ordinance.

3. Section 222(1) provides:-

"        Where an order has been made for winding up a company by the court, and the Official Receiver has made a further report under this Ordinance stating that in his opinion a fraud has been committed by any person in the promotion or formation of the company, or by any director or other officer of the company in relation to the company since its formation, the court may, after consideration of the report, direct that that person, director or officer shall attend before the court on a day appointed by the court for that purpose, and be publicly examined as to the promotion or formation or the conduct of the businass of the company, or as to his conduct and dealings as director or officer thereof.".

An appointment was made for the examination to take place before a Master on the 6th June 1984.

4. A notice of motion was issued on the 5th June 1984 for hearing the same day on behalf of the applicants for the order to be discharged on the grounds that the report of the Official Receiver in support of the application did not state that in his opinion fraud had been committed by any of the applicants. The report merely states that the Official Receiver had formed the opinion that fraud may have been committed by the directors and officers of the company in connection with its promotion formation and/or operation since its formation. At the hearing Mr. Oliver who appeared for the Official Receiver agreed to the discharge of the order but submitted that each side should bear its own costs.

5. However, Mr. Bunting who appeared for the applicants submitted that costs should be paid by the Official Receiver.

6. I adjourned the application in respect of costs to enable the Official Receiver to file an affidavit in reply to deal with the applicants' allegations generally and also as to the manner of service upon which a dispute had arisen at the hearing. Mr. Oliver in his affidavit of the 9th June 1984 deals with the service of the order upon the applicants, but makes no comment on the gravagen of the application. It is unnecessary for me to dwell on the matter of service for it is quite clear on the uncontradicted facts that the order of the 18th April 1984 should not have been made upon the evidence placed before the court. Before an order could be made it was necessary for the Official Receiver to establish at least a prima facie case of fraud and that fraud had been committed by any person in the promotion or formation of the company, see In re Civil Naval and Military Outfitters Limited (1899) 1 Ch. 215. In that case Vaughan Williams, L.J. had this to say at p. 240

"..........you ought not to subject any one to a public examination unless you are satisfied on the report that the official receiver has come to the conclusion, and upon some substantial grounds that a charge of fraud is disclosed by the facts against the person whom it is ought to examine such a charge that he may understand what it is from which he will have to exculpate himself, and with which it is sought to incriminate him.".

The Official Receiver's report fell fer short of those requirements.

7. I must also accept responsibility for overlooking these matters when the application was made. Had I considered the application correctly it would have been dismissed in limine. As a result the applicants were obliged to issue the motion to discharge the order. It follows that the applicants' costs must be paid by the Official Receiver.

8. Mr. Bunting then submitted that the costs should be borne personally by the Official Receiver. However, the Official Receiver is an officer of the court having been appointed by the court to be the liquidator of the company. He acts in a judicial capacity when he carries out his statutory duties under the Companies Ordinance. Unless he steps outside his statutory functions and becomes a party to the proceedings in the role of a litigant the Official Receiver cannot be ordered to pay the costs personally, see In re John Tweddle & Company Limited (1910) 2 K.B. 697.

9. In the instant case the Official Receiver was not a litigant but was performing one of his statutory duties when he applied for the order to examine the applicants. A mistake was made, but there is no doubt that it was an innocent mistake. In these circumstances I hold that the Official Receive is not liable to pay the costs personally.

Representation:

Mr. D.R.J. Oliver for Official Receiver.

Mr. M. Bunting (Baker & McKenzie) for Applicants.