The Commissioner for Commodities Trading v. The Official Receiver, The Official Revceiver and Liquidator of National Commodities Traders Ltd

HCCW000148/1982

COMPANIES WINDING-UP

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BETWEEN:-

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Coram: The Honourable Mr. Justice Jones in Chambers

Date of hearing: 13 April 1984

Date of delivery of judgment: 13 April 1984

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JUDGMENT

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1. This is an application by the Commissioner for Commodities Trading (the Commissioner) to reverse the rejection by the Official Receiver on the 1st March 1984 of a proof of debt for the sum of $130,228.20.

2. It is common ground that Price Waterhouse Certified Public Accountants were appointed as auditors of National Commodities Traders Limited (N.C.T.) in July 1982 by the Commissioner pursuant to Section 52(1) of the Commodities Trading Ordinance Cap. 250.

3. Section 52(1) provides :-

"52. (1) Where

The terms of appointment were set out in a letter to Price Waterhouse dated the 14th July 1982 as follows:-

4. Price Waterhouse were given powers by the Commissioner under Section 55(1) to examine and audit books, accounts and records for the purpose of carrying out the examination and audit. The Commissioner undertook to be responsible for payment of the fees and costs incurred by Price Waterhouse.

5. A report on the financial position and other matters of N.C.T. as at the 30th June, 1982 was prepared by Price Waterhouse and submitted to the Commissioner in August 1982. The main findings were that N.C.T. was unable to meet its immediate obligations without the introduction of substantial external funds, that it did not appear to be a going concern as a commodity trading company, and there had been several instances of contraventions of Section 46(2) of the Ordinance which requires a dealer to pay monies into segregated accounts. Price Waterhouse said that the examination was not carried out in accordance with generally accepted auditing standards so that an opinion on the financial statements was not expressed. Price Waterhouse submitted an account for their fees and charges in the sum of $130,228.20 which was raid by the Commissioner.

6. On the 30th September 1982 N.C.T. was ordered to be wound up. The Official Receiver was appointed to be the liquidator.

7. On the 23rd September 1983 the Commissioner lodged a proof of debt with the Official Receiver for the costs paid to Price Waterhouse. The original claim that the debt be treated as preferential has been abandoned. It is also agreed that the debt is a debt due to the Crown.

8. The main thrust of Mr. Allison's argument on behalf of the Official Receiver is that the work carried out by Price Waterhouse did not amount to an "audit" within the accepted meaning of the term. He also criticised the report on the grounds that Price Waterhouse failed to express an opinion qualified or otherwise on the accounts of N.C.T.

9. Mr. Allison drew my attention to the definition of "audit" set out in an American dictionary 'The Attorneys Pocket Dictionary' Which reads:-

He also referred to the definition of audit given by the Hong Kong Society of Accountants which reads:-

10. Mr. Allison further submitted that Section 141 of the Companies Ordinance Cap. 32 requires an auditor of a company to express a view on the accounts audited and to be satisfied about their reliability before expressing an opinion.

11. Criticism was levelled at the report in respect of errors that had been discovered by the Official Receiver and I was asked to draw an inference that it was unreliable. However, I am unable to accent these observations for in effect Mr. Allison was attempting to give evidence. In any event the report was given for the benefit of the Commissioner who was the proper person to raise any queries with Price Waterhouse.

12. The Commissioner is the watchdog for a highly volatile area of trading. When the Commissioner became aware of the financial difficulties encountered by N.C.T. he appointed an international firm of accountants of the highest repute to carry out the examination and audit. A detailed report including a balance sheet up to the 30th June, 1982 was prepared and a view was expressed that N.C.T. could not be regarded as a going concern. By virtue of Section 52(2) of the Ordinance the Commissioner considers that N.C.T. should bear the whole of the costs and expenses of Price Waterhouse whilst the Official Receiver takes the view that the Commissioner should be held responsible.

13. Section 19 of the interpretation and General Clauses Ordinance Cap. 1 provides that an ordinance shall be given a fair, large and liberal construction and interpretation to ensure the attainment of the object of the ordinance according to its true intent meaning and spirit. Essentially Price Waterhouse were required to carry out a general investigation on behalf of the Commissioner. They were not employed by N.C.T. as the auditor of the company to carry out an audit.

14. In my judgment the word 'audit' should be given a general meaning to include an investigation or examination of accounts. The restricted definition contended for by Mr. Allison does not accord with the true intention of the ordinance so that it has no application to the circumstances of this case. Accordingly the decision of the Official Receiver is reversed and the proof for the sum of $130,228.20 will be admitted in full. Costs to the Commissioner.

Representation:

Mr. N. L. Strawbridge for Applicant.

Mr. C. H. Allison for Official Receiver.