The Official Receiver v. Fan Siu Ting and Another
Read the full judgment text of HCMP 916/2004 on BabelCite. This High Court CFI judgment was delivered on 6 December 2004.
1. Preciousfield Limited (“P Ltd”) was incorporated in Hong Kong on 1 June 1995. A winding up order was made by the Court on 8 September 2000 in HCCW 335/2000. Upon investigation by the liquidators, P Ltd was found to be insolvent as it had liabilities of $3,860,887.22 while assets realized, $2,859.00.
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HCMP 916/2004 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 916 OF 2004 ______________________
______________________ BETWEEN
______________________ Coram : Master J. Wong in Court Date of Hearing : 17 November 2004 Date of Handing Down Judgment : 6 December 2004 _______________ J U D G M E N T _______________ Background 1.Preciousfield Limited (“P Ltd”) was incorporated in Hong Kong on 1 June 1995. A winding up order was made by the Court on 8 September 2000 in HCCW 335/2000. Upon investigation by the liquidators, P Ltd was found to be insolvent as it had liabilities of $3,860,887.22 while assets realized, $2,859.00. 2.On the other hand, Elegant Wise Investment Limited (“EWI Ltd”) was incorporated in Hong Kong on 18 April 1997, and it was wound up on 6 March 2000 under HCCW 825/1999. It was insolvent too as assets were realized at $630,338.30 when liabilities was in the region of $1.8 m. 3.Both the 1st and 2nd Respondents were at the material times directors of P Ltd and EWI Ltd. In performing her duties as liquidators in these 2 companies, the Official Receiver (“OR”) found the conduct of the two Respondents unsatisfactory. She formed the view that disqualification orders under Section 168H Companies Ordinance Cap 32 (“CO”) should be made against both Respondents in the public interest. 4.On 8 April 2004, the present proceedings were commenced. The 1st Respondent filed an acknowledgment of service herein on 8 July 2004 indicating that she would not contest the application. As to the 2nd Respondent, he did not file any acknowledgment. 5.A call-over hearing was held by me on 21 September 2004. Although both Respondents did not turn up, there was insufficient time for the Court to deal with the matter and as such, it was adjourned to a date to be fixed for submissions with 2 hours reserved. 6.The matter went back before me on 17 November 2004. 5 reports and an affirmation from a Treasury Accountant were filed for OR. The 1st Respondent was absent while the 2nd Respondent was present. He submitted 2 letters, dated 11 October 2004 and 16 November 2004 respectively, with some attachments thereto. Ms Fiona Lee, Assistant Principal Solicitor, for OR, told me that she had included all documents of the Respondents in the hearing bundles before the Court. Against this background, this Court proceeded to hear the parties’ submissions. Preliminary matter 7.Ms Lee told me that Section 168P CO required OR to serve not less than 10 days’ notice to the Respondents. OR did not comply with it in the present case. However, such requirement was directory only, and not mandatory (Re Ceda Ltd [1991] BCC 148). In any event, there was no evidence that the two Respondents were prejudiced in any aspect. I further heard no objection from the Respondents in this aspect. Hence, such technical non-compliance of the rules did not affect the present applications. 8.I would add that, upon my enquiry, the 2nd Respondent made clear that, though not entirely agreeing with the submissions of OR, he intended only to apply to mitigate in the present proceedings. Complaints by OR 9.OR made similar complaints against both Respondents. In brief,
Case of the 1st Respondent 10.The 1st Respondent made clear that she did not intend to defend for the present application. She made no reply to OR’s specific complaints. However, in the letter she wrote to OR on 16 March 2004:
Case of the 2nd Respondent 11.In summary, the 2nd Respondent said that:
Ruling 12.Upon careful consideration of the evidence, authorities and submissions, I am satisfied that OR has discharged his duty to prove all the complaints against both Respondents on balance of probabilities. 13.The major defences or explanations by the two Respondents that they did not know, they did not have the documents, and so on, could not sustain in light of the duties imposed upon directors of limited companies. As Ms Lee pointed out that the duties of directors had been considered by Parker J in Re Bargins plc (No. 5) at p. 489, and agreed by Mornitt LJ on appeal at p. 535 to 536, namely:
Hence, in our case, when both Respondents abrogated their responsibilities as directors, without acquiring any personal knowledge, they were wrong in the eyes of the Court and could not escape the liabilities. 14.For the 2nd Respondent, he further purported to offer explanations to the alleged misapplication of monies in P Ltd. However, with respect, his attempts failed OR and this Court. The explanations changed from time to time when OR discovered contradicting evidence. They lacked contemporaneous and corroborative evidence to support. As I discussed them with the 2nd Respondent at the hearing, putting his case to the highest, which is not accepted by me on the available evidence, he still failed to keep proper books and accounts to reflect the transactions of the companies. Mitigation 15.I hear nothing from the 1st Respondent to mitigate the sentence to be imposed. But, the 2nd Respondent did say something of which I agree to accept some of them: he was remorseful, he learnt a lesson, he was in his mid-fiftes and, the longer the disqualified period, the more difficult it would be for him to re-build his life. Conclusion 16.The authorities of Re Sevenoaks Stationers (Retails) Ltd [1990] BCC 765 and Re Westmid Packing Service Ltd (No. 3) [1998] BCC 837 are the leading authorities in assessing the appropriate period of disqualification of directorship. Applying the principles thereof to our case, I agree with the suggestion of Ms Lee that 5 years, the upper end of the minimum bracket is appropriate in the circumstances for both Respondents. Having further taken into account of the mitigation by the 2nd Respondent as aforesaid, I take off 1 year from the period for him. As such, the following orders are made. (A) From the beginning of the 21st day after the date of this order,
Ms F Lee for Official Receiver. 1st Respondent being absent. 2nd Respondent appearing in person. |