Re Jones Photo Supplies Ltd

HCCW000204/1982

Once notice is served on the bailiff-of the presentation of a winding-up petiton or the calling of a meeting for passing a voluntary winding-up resolution within 14 days after completion of execution, an order made or resolution passed in due course even beyond the prescribed period would defeat the execution creditor's interest - Upon the making of the order and the passing of the resolution, the bailiff shall pay over the balance to the liquidator.

IN THE SUPREME COURT OF HONG KONG

COMPANIES WINDING-UP

No. 204 OF 1982

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Coram: Hon. LIU J. in Chambers

Date: 2 December 1982

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JUDGMENT

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1. Agreement has been reached between the Official Receiver as Provisional Liquidator and the Registrar for the determination of an issue in the following terms, namely, "Whether the making of a winding-up order must necessarily be within the prescribed period of 14 days for section 270(2) of the Companies Ordinance to be invoked.” Section 270(2) is set out verbatim below:-

"Where under an execution in respect of a judgment for a sum exceeding $200 the goods of a company are sold or money is paid in order to avoid sale, the bailiff shall deduct the costs of the execution from the proceeds of the sale or the money paid and retain the balance for 14 days, and if within that time notice is served on him of a petition for the winding-up of the company having been presented or of a meeting having been called at which there is to be proposed a resolution for the voluntary winding-up of the company and an order is made or a resolution is passed, as the case may be, for the winding-up of the company, the bailiff shall pay the balance to the liquidator, who shall be entitled to retain it as against the execution creditor.”

2. Counsel for the official Receiver qua Provisional Liquidator invited me to construe the sub-section under consideration according to the true spirit, object and intent of the Companies ordinance. In that direction, reference was made to Rule 207(2) of the Companies (winding-Up) Rules which seems to have been given some added recognition by section 296(2) of the Companies Ordinance. It was submitted that even the avoidance of certain preferences over creditors was exclusively tied to the commencement of the winding-up, that is to say the 3 months' interval before the presentation of the petition. Counsel argued that Rule 207(2) which required the bailiff "to forthwith notify the Registrar" upon the mere receipt of notice within the 14 days was a staunch demonstration of the purport of an unobscure sub-section. Independently, so counsel elaborated, section 270(2) admits of no ambiguity and the reference to the making of a winding-up order therein is a free-standing provision separate from and uninhibited by the prescribed 14 days' period. Finally, it was urged upon me as virtually untenable on authorities that the prescribed period of 14 days was intended to be linked up with the making of the winding-up order or that service of a notice of the petition on the bailiff through the Registrar within time to be followed by a winding-up order was insufficient to bring into operation section 270(2).

3. Counsel referred me, in particular, to the case of Bluston & Bramley Ltd. v. Leigh, ^(l) where the words, "as the case may be", were construed at page 554 by Mr. Justice Morris as meaning "in the events that happened". I was reminded that none of the learned authors of a wide range of legal publications had sought to relate such prescribed period of 14 days to the provision for the making of a winding-up order and that the interpretation of Morris J. had consistently met with general approval.

4. Mr. Graham for the Registrar called in aid passages at pages 523, 526 and 527 in Watkins v. Barnard,⁽²⁾ where section 11 of the Bankruptcy Act, 1890 was Considered. An equivalent provision in our Bankruptcy Ordinance is couched in somewhat different language, but the then section 11 of the English Act of 1890 bears a striking resemblance to section 270(2) of our Companies Ordinance and reads as follows:

"Where under an execution in respect of a judgment for a sum exceeding £20, the goods of a debtor are sold or money is paid in order to avoid sale, the sheriff will deduct his costs of the execution from the proceeds of sale or the money paid, and retain the balance for 14 days; and if within that time notice is served on him of a bankruptcy petition having been presented against or by the debtor, and a receiving order is made against the debtor thereon, or on any other petition of which the sheriff has notice, the sheriff shall pay the balance to the official receiver or, as the case may be, to the trustee. "

5. On close examination, it seems to me patent that the only point at issue in watkins case was whether the service of a notice of a petition against a debtor then living within the prescribed 14 days would preserve the right of the trustee coming in on a necessary but subsequent petition for an administration order in bankrupt against his personal representatives presented outside that prescribed time after his death. It was there held by Vaughan Williams J., as he then was, that the earlier notice served within time was ineffective for the purpose of setting section 11 in motion for the following petition presented against the deceased's estate outside the prescribed 14 days' period after his death, which consequently fell outside the statutory protection afforded by the provision. In that case, the time for the making of the eventual receiving order or administration order was never called in question. This could not have been more clearly reflected in an overriding decision of the English Court of Appeal in Latter v. Juckes and Page, ⁽³⁾ in which the view expressed by Vaughan Williams J. was departed from. All of the appeal judges accepted the effect of a receiving order made beyond the prescribed period as a matter of settled principle. If any of the observations of Vaughan Williams J. could be understood to have superimposed a time element on the making of a receiving order for defeating the title of an execution creditor, the English Court of Appeal could not have been content to leave it undisturbed. The passages in the judgment of Vaughan Williams J. read in their proper context are, therefore, plainly irrelevant.

6. It seems to me that the real nub of the Official Receiver's contention rests on the phrase "as the case may be". The observations in Latter case and the interpretation offered therefor in Bluston have, in my opinion, removed any obscurity in the interpretation of that very sub-section introduced for the first time in England by the 1929 Companies Act ⁽⁴⁾ subjecting the title of an execution creditor to defeasance. It is reasonably clear that so long as the order or resolution, subject-matter of the notice, follows in due course, there is no specific time limit regarding the making or passing of it for the purpose of divesting the creditor’s interest.

7. Consequently, the matter seems to me to leave little room for argument, and the issue should be decided in favour of the official Receiver as Provisional Liquidator, viz. that the winding-up order need not be made within the prescribed period of 14 days for the benefit under section 270(2) of the Companies ordinance to accrue.

8. Mr. Remedios appearing for the judgment creditors involved in these proceedings has elected to remain silent. It is to be noted that the agreed issue was an issue to be determined as between the official Receiver as Provisional Liquidator and the Registrar. The importance lies not so much in the merits of the claims in the company's winding-up petition in the administrative side of it vis-a-vis the Provisional Liquidator and the Registrar and through him the Court bailiff.

9. As for costs, it has at one stage caused some anxiety. One may wonder how costs could be ordered to pass from one hand to another: The Registrar is an officer of the court and the Provisional Liquidator functions under my supervision. However, in one of the cases brought to my attention by Mr. Faulkner, it would appear to be legitimate and regular for costs to be awarded against an officer of the Court on his refusal to retain the money after receipt of notice of the presentation of a petition. The Registrar wears, as we all know, many hats. There was no conceivable reason why he should not have embraced the opinion of one of our experienced Deputy Registrars of the District Court inimical to the claim of the official Receiver. No one has doubted that the Registrar acted responsibly and fairly, but the resistance to the claim of the Provisional Liquidator has been ruled to be erroneous and the issue has been decided adverse to the Registrar. I would order costs against him as sought.

10. The creditors in this case represented by Mr. Remedios do not seek costs, and I need say no more. Costs reserved on the 23rd of November 1982 is not a subject--matter in dispute. I am invited to make no order as to costs for that hearing, and I accede to that request.

(1)    [1950] 2 K.B. 548

(2)    [1897] 2 Q.B. 521

(3)    [1927] 1 K.B. 17

(4)    See p. 306 Palmer's Company Precedents Part II, 17th ed.

Representation:

Mr. Raymond Faulkner instructed by official Receiver for the Provisional Liquidator of the Company.

Mr. Peter Graham with Mr. 41.S. Yip, Crown Solicitors, for Registrar, supreme Court

Mr. Leo Remedios instructed by Messrs. Hastings & Co. for Judgment Creditors in High Court Action No. 6934/82