Re So Kwok Kuen t/a Shun Hing Trading Co

HCB000016/1982

A bankruptcy petition presented by an officer not authorized under the common seal of a limited company as required by s.126 of the Bankruptcy Ordinance Cap.6 is a nullity - the officer's lack of legal capacity to act for the company cannot be cured by what purports to be a validating resolution --- attention directed to proper procedure for presenting a bankruptcy petition by a duly authorized officer on behalf of a limited company.

IN THE HIGH COURT OF JUSTICE

IN BANKRUPTCY NO.16 of 1982

In the matter of a bankruptcy petition filed on 26th day of March, 1982.

Coram: Hon. Liu, J. in Court

Date: 1 May 1982

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JUDGMENT

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1. This is a creditor's bankruptcy petition presented on the 25th March, 1982 purportedly on behalf of a limited company by its Finance Manager against an alleged debtor. A preliminary point for consideration was whether the Finance Manager was a person authorized by s.126 of the Bankruptcy Ordinance to present this petition.

2. The facts are wholly free from any complication. The Finance Manager of the petitioning, company was evidently under t instructions to launch the petition. It is also clear, however, that he was not so authorized to act under the company's common seal. When this omission came to light, acknowledging as the settled law that a limited company could not be represented in bankruptcy proceedings except by an officer duly authorized under seal, counsel produced at the adjourned hearing an extract from the company's Minutes Book containing a resolution to the effect that on the 8th April, 1982, a fortnight after the presentation of the petition, the Finance Manager was authorized under seal to secure a Receiving Order on behalf of the company against the alleged debtor. That authorization under, seal on the 8th April was never intended to relate back retrospectively. Being only too conscious of the difficulty thus created, counsel for the petitioning company sought a further adjournment. At the resumed hearing, another resolution under seal currently passed on the 27th April was submitted, which purported to validate the prior instructions, not given under seal, to the Finance Manager for presenting a bankruptcy petition as an officer of the petitioning company. It also confirmed that the Finance Manager had "at all material times" the authority to represent the company, although no "formality" of an authorization under seal was attended to until the 8th April.

3. Part of the resolution passed on the 27th April reads as follows:

"It is therefore resolved that the company hereby ratifies and confirms the authority of the said Thomas Chu to present the petition on behalf of the company as well as all acts and steps taken by the said Thomas Chu in that regard as if the said Thomas Chu were duly authorized under seal of the company to present the petition at the time it was done."

4. The root of the matter lies not so much in whether the Finance Manager had the authority from the petitioning company to pursue these bankruptcy proceedings but whether he had the capacity to exercise that authority, which could only be conferred by an authorization under seal, as required by s.126 of the Bankruptcy Ordinance. In other words, the focal point is whether the Finance Manager, though acting under instructions, had the right to represent the company in the presentation of its bankruptcy petition. An incidental question which calls for an examination is whether a subsequent resolution purporting to ratify and confirm would clothe the Finance Manager with the necessary statutory capacity to act as an authorized officer on behalf of the company as at the date of the presentation of its petition in these proceedings.

5. S.126 of the Bankruptcy Ordinance reads as follows:

"For all or any of the purposes of this Ordinance a corporation may act by any of its officers authorized in that behalf under the seal of the corporation, a firm may act by any of its members and a lunatic may act by its committee or curator bonis."

6. The Official Receiver has raised no opposition. This is a fundamental question of validity, and despite the stance of the Official Receiver, it would be incumbent upon me to determine whether the Finance Manager of the petitioning company was endowed with the requisite statutory capacity to present the company's petition. It need be constantly borne in mind that it is not every authorized officer, but only an officer authorized under seal, who may act and present a bankruptcy petition on behalf of a limited company. His instructions must comply with s. 126 and come with the sanction of the company's common seal.

7. In bankruptcy matters, much may be said for a disciplined adherence to the procedure laid down and the precedent forms suggested. It would appear to be conducive to good administration to observe the recommended practice of an official inspection of an officer's authority under seal in the procedural table at page 91 of Volume 7, Atkin's Court Forms, 2nd edition. Good Guidance is also offered at page 230 et seq. on the forms of the petition and the requisite authority under seal for a limited company's petition presented by its officer. The standard verifying affidavit is found in Form 119 at page 251 of the same volume of Atkin's. In this case, there seems to be room for improvement in this regard, but I will proceed on the basis that they are curable imperfections.

8. It also seems to be the general practice for a limited company to present a creditor's petition in bankruptcy by its secretary. In re Whitley, Ex parte Mirfield Commercial Co.⁽¹⁾. The company here was purportedly represented by the Finance Manager, but there is no rule against any other company employee duly appointed under seal petitioning on its behalf. In re Tomkins & Co. ⁽²⁾.

9. Finally, I return to the crux of the matter viz. whether the Finance Manager was an "officer authorized in that behalf under the seal of the corporation" to present the petition ⁽³⁾ and what effect the resolution passed on the 27th April had.

10. The Finance Manager was under instructions to commence bankruptcy proceedings against the alleged debtor and must therefore be vested with authority, in the general sense, to discharge his duty. There was no necessity, vis-a-vis the company, for ratification of any of the acts done in these  proceedings pursuant to his instructions. What the Finance Manager lacked was a s.126 authorization under seal, without which he could not act or present a petition for the company in bankruptcy. The authority given under the common seal of the company by the resolution passed on the 8th April was to have effect as from even date and was not intended to operate retrospectively. The resolution passed on the 27th April did not seek to invest the Finance Manager with the requisite capacity to act but was intended to adopt his act and treat it as if it had been done with an authority under seal. The bankruptcy law requires an officer acting for a limited company to be authorized under seal as at the date of his act. All legislative purpose would be liable to be defeated if a statutory requirement under the Bankruptcy Ordinance were allowed to be circumvented by a private resolution. Ratification is a device to adopt an act done without authority, but it would not alter the nature of the act done or the capacity of the person in which he acted. Given a situation, a ratification may be invoked to regularize it. A ratification is not meant to and cannot change the fait accompli or substitute it with a modified version. On a slightly different plane of analysis: The Finance Manager lacked the requisite status as an officer authorized under the common seal, and he could not bring himself within s. 126 of the Bankruptcy Ordinance to act for the company in its presentation of a creditor's bankruptcy petition. His purported act was devoid of any legal validity, and as a nullity it could not be ratified. It need not be emphasized again that the Finance Manager had the company's blessing to embark on proceedings in bankruptcy, of which he would require no ratification, and yet he had no legal capacity to implement those instructions and represent the company in bankruptcy-proceedings. If what was attempted by the resolution passed on the 27th April was to have him installed retrospectively in a position with the requisite statutory status to act for the company, S. 126 did not allow him to act for the company unless he was duly authorized under seal at the time when the petition was presented, and that section could not simply be rewritten by company directors to read "a corporation may act by any of its officers retrospectively authorized in that behalf under the seal of the corporation". The incapacity of the Finance Manager in bankruptcy cannot be, in my view, cured.

11. There seems to be no decision directly in point. In the case of In re a Debtor,⁽⁴⁾ an officer of a petitioning company was duly authorized under s.148 of the Bankruptcy Act 1883, which is equivalent to our s.126, "to present a petition in bankruptcy on behalf of a company against the debtor and to carry on and act in the proceedings subsequent thereto." It was held on appeal from the County Court Registrar that the authorization under seal was not wide enough to entitle the secretary to present a petition founded on a subsequent act of bankruptcy. In that 1915 case, it was not suggested that the company did not so instruct its secretary, but the debate turned on the aspect that he had not been authorized under seal to act in a subsequent act of bankruptcy. The secretary there was acting on instructions, and his act would require no ratification. He had no legal capacity to act for the company at the time of the further petition, and no purported ratification could reverse that state of affair. Similarly, there could be no substance for any amendment. It is understandable that neither ratification nor amendment was canvassed before the judges sitting in appeal in that 1915 case.

12. In re a Debtor ⁽⁴⁾ was considered and explained in a later case also by the name of In re a Debtor ⁽⁵⁾ which was confined to the true interpretation of a resolution and took the matter no further.

13. In my judgment, the purported ratification subsequently passed on the 27th April, 1982 by the petitioning company could not have the effect of bestowing on Finance Manager the statutory capacity of an officer authorized under seal as at the date of the presentation of the petition.

14. For all these reasons, the Finance Manager was not a person authorized to act for the company by s.126 as at the date of the presentation of the petition. I have expressed my view on the effect of the purported ratification, and on the view so taken there is no substance to support counsel's application for an amendment. In the circumstances, the question re 15% also does not arise.

15. In conclusion, the Finance Manager had no requisite statutory authority under seal to present the petition for and on behalf of the company, and the whole proceedings are, in my view, a nullity. The petition cannot therefore be maintained and is accordingly dismissed.

(1)  (1891) 8 Mor. 149.

(2)  [1901] 1 Q. B. 476.

(3) See p.495 Williams & Hunter on Bankruptcy 19th ed. ; 3 Halsbury's Laws of England p.283 4th ed.

(4)  [1915] 1 KB. 287.

(5)  [1917] 2 K.B. 808

Representation:

Mr. Leo Remedios instructed by Messrs. D'Almada Remedios & Co. for the Petitioning Creditor.

Mr. O'Connell for Official Receiver.