Alexandra Knitters Ltd v. A.B. Hellenic (A Firm)

HCA001488/1971

IN THE SUPREME COURT OF HONG KONG

ORIGINAL JURISDICTION

Action No. 1488 of 1971

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Coram: Blair-Kerr, S.P.J., in chambers

Date of Judgment: 24th September, 1971.

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JUDGMENT

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1. On 9th July 1971 the plaintiffs took out a writ in which the defendants were named "A.B. Hellenic (a firm)." On 29th July the defendants caused a conditional appearance to be entered. It was in this form:

"...... enter an appearance for the defendants A.B. Hellenic wrongly sued as A.B. Hellenic (a firm), a limited company incorporated in Sweden having its registered office situate at Vasaplatsen 8, Gothenburg, Sweden, but having its branch and carrying on business at 606 Tung Ying Building, 100 Nathan Road, Kowloon .......... in this action."

On 30th July the plaintiffs took out a summons in which they gave notice of their intention to apply under O.14 r.1(1) for summary judgment for the sum claimed. On 28th August the plaintiffs took out a further summons in which they gave notice of their intention to apply under various rules (including O.2 r.1) for an order setting aside the appearance filed by the defendants on the ground that it failed to comply with O.81 r.4(1). This latter summons came before me on 21st September and I reserved my decision thereon.

2. The defendants have not complied with the provisions of Part XI of the Companies Ordinance, Cap.32. However, in October 1966 they registered themselves under the regulations made under the Business Registration Ordinance, Cap.31O. In doing so, they used Form 1(b), which is the statutory form prescribed for use by foreign bodies corporate in the registration of a business carried on by them in Hong Kong. In this form they declared that their "registered office" was Vasaplatsen 8, Gothenburg, Sweden; and the business in Hong Kong was described as "the Hong Kong office (branch)". The address of this Hong Kong "branch" was Holly Mansion Building, 37 Kimberley Road, 4th floor, B flat, Kowloon. They subsequently registered their new address viz. 606 Tung Ying Building, 100 Nathan Road, Kowloon.

3. In an affidavit filed by the defendants' manager in Hong Kong, he says:-

"The office of the defendants' in Hong Kong is primarily an inspection office set up to inspect goods ordered by the head office normally placed by the head office direct with manufacturers in Hong Kong and documentation and correspondence sent direct from the parent company to manufacturers and vice versa."

The defendants' argument is that although they undoubtedly carry on business in Hong Kong - and for gain - within the meaning of ss.2 and 5 of the Business Registration Ordinance they cannot be said to have established a place of business within the meaning of Part XI of the Companies Ordinance.

4. There are a number of decisions on this point, viz. Lord Advocate v. Huron and Erie Loan and Savings Co.⁽¹⁾, Banque des Marchands de Moscou (Koupetschesky) v. Kindersley⁽²⁾, Deverall v. Grant Advertising Inc.⁽³⁾ and Re Lloyd Generalo-Italiano⁽⁴⁾. The effect of these decisions is summarised by the learned editors of Palmer's Company Law (20th Ed.) at p.761 in these words:-

"A company has an established place of business in Great Britain if it has a specified or identifiable place at which it carries on business, 'a local habitation of its own' e.g. an office; there must be some 'visible sign or physical indication' that the company has any connection with particular premises. It is not sufficient for the company to carry on business through an agent."

5. The Chairman of the Board of Directors of the plaintiff company has filed a number of affidavits. In one affidavit, he says:-

"The transactions between myself and the defendants forming the subject matter of this action were concluded between myself, the sole proprietor of the defendants Mr. Manganas and the manager of the defendants ............ Throughout the dealings between the defendants and the plaintiff company, the defendants have been requesting the plaintiff company to supply them with samples and the defendants had agreed to pay the sample charges. Whenever an order for samples was received from the defendants, the plaintiff company would deliver the samples to the defendants' premises in the Colony together with a debit note .......... The defendants' employees would place their signature on the lower left hand corner of such debit notes in acknowledgment of receipt. Such debit notes bear the itemised list of the price of each individual sample as well as the total of that bill. Sometimes the defendants requested the plaintiff company to send the samples direct to their office in Sweden. In respect of such samples, an invoice would be delivered to the defendants' office in the Colony .......... such invoices ...... show clearly the price of the samples. A monthly statement would also be tendered to the defendants for their attention setting out the amounts of each individual debit note and invoice as well as the total amount delivered during the previous month and also a specific item showing the total amount of sample charges outstanding ...... Our company has never received any communications from the defendants denying liability for such sample charges throughout these years despite the hundreds of the aforesaid debit notes, invoices and monthly statements ......"

6. In nother affidavit the Chairman says:-

"Throughout my dealings with the defendants, they gave me to understand that they were operating as a firm and that their sole proprietor was one I. Manganas."

Although this latter allegation is not specifically denied by affidavit, the stand taken by the defendants is perfectly clear, viz. that they are a company incorporated outside Hong Kong carrying on business in Hong Kong.

7. Sample orders, letters of confirmation etc. emanated from both the defendants' head office in Sweden and from their local office in relation to the same business transactions. Although the letterheads on such documents do not contain anything to indicate that A.B. Hellenic is a company incorporated in Sweden, there is nothing to indicate that their Hong Kong office is a legal entity independent of the Swedish company. Indeed, the evidence is all the other way. The plaintiffs did not check either the Companies Registry or the Register kept under the Business Registration Regulations before commencing this action. These are public registers; and it seems to me that the defendants' registration under the Business Registration Regulations constituted a notice to the world that, as a foreign incorporated body, they were carrying on business in Hong Kong.

8. I do not wish to say anything which might prejudice the defendants should any person institute proceedings under s.340 of the Companies Ordinance. But, in my view, the defendants have established a place of business within the meaning of Part XI of the Companies Ordinance. If I am correct in this view, the defendants are in breach of s.333 of that Ordinance; and, if that is so, the sooner they mitigate their default the better.

9. Counsel for the plaintiffs referred to various rules of court including O.12 rr.7(2) and 8, and O.81 r.4(1). His submission, as I understood it, was to the effect that his clients have always been given to understand that the defendants' office in Hong Kong operated as a local partnership quite independent of the Swedish "head office"; that it is not open to the defendants now to allege that they are a company incorporated outside Hong Kong carrying on business in Hong Kong; that the combined effect of O.12 rr.7(2) and 8 is that the court must now treat the defendants' conditional appearance as unconditional with the result that it is not open to them to raise the question whether they are being properly sued; that if the defendants really are a foreign corporation carrying on business in the Colony it was their duty to apply to court under O.12 r.8 for an order setting aside the writ; and that their failure to do so is an irregularity which now justifies the plaintiffs seeking an order setting aside the defendants' appearance on the ground that they have failed to comply with O.81 r.4(1).

10. I do not propose to discuss this submission any further. It may be that the plaintiffs and their legal advisers were, to some extent, negligent in that, before embarking on this litigation, they should have checked the various public registers in order to ascertain correctly the legal status of the defendants. An examination of the register kept under the Business Registration Regulations would have put the plaintiffs on guard. On the other hand, an examination of the Companies Registry would have revealed nothing; and it seems to me that the plaintiffs were probably misled by the form of the note paper used by both the defendants' Swedish office and their local office in that there is nothing on the letterhead comparable to the English word "Limited".

11. The writ will have to be amended to indicate clearly the defendants' true status. The defendants are quite content to have their conditional appearance treated as unconditional provided the writ is amended. It may be that, before doing so, the plaintiffs would prefer to wait till the defendants have complied with s.333 of the Companies Ordinance. If the defendants fail to comply, I apprehend that a prosecution under s.340 of the Companies Ordinance may be instituted. But I am not concerned with that aspect of the matter on this application.

12. For the above reasons, the plaintiffs' application for an order that the defendants' appearance be set aside for irregularity is dismissed.

13. On the other hand, the defendants are more to blame than the plaintiffs for this mix-up; and they must pay the plaintiffs' costs of this application in any event.

Representation:

Winston Chu (Peter Mo & Co.) for Plaintiff.

Smith (Deacons) for Defendant.

Judgment sent to parties concerned.

(1) (1911) S.C. 612

(2) (1951) Ch. 112

(3) (1954) 3 All E.R. 389

(4) (1885) 29 Ch. D. 219