Glenn Harrigan, Liquidator of Tele-art Inc. (in Liquidation) v. Tam King Ching Kenny and Others

HCMP 26/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 26 OF 2006

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BETWEEN

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Before : Hon Barma J in Court

Date of Hearing : 25 May 2006

Date of Further Written Submissions : 21, 28 June 2006

Date of Judgment : 4 August 2006

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J U D G M E N T

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Introduction

1.In these proceedings, the Applicant, who is the liquidator of a British Virgin Islands company called Tele-Art Inc. (“TAI”), seeks orders for the rectification of the Register of Members of Tele-Art Limited (“TAL”), a Hong Kong company, pursuant to section 100 of the Companies Ordinance (Cap. 32).  TAL is itself in liquidation.  There are three respondents to the application.  The 1^st Respondents are the liquidators of TAL.  The 2^nd and 3^rd Respondents are Mr Elmer Yuen (“Mr Yuen”), who was formerly the sole director of TAI and a director of TAL, and his daughter, Ms Mimi Yuen (“Ms Yuen”).  The principal relief sought by the Applicant is set out in paragraphs (1) and (2) of the Originating Summons in the following terms:-

“	(1)	pursuant to Section 100 of the Companies Ordinance (Cap. 32) the Register of Members of [TAL] be rectified by striking out the name of [Mr Yuen] as the holder of 153,999 ordinary shares numbered 1 to 141,679 and 141,681 to 154,000 inclusive, and the name of [Ms Yuen] as the holder of 1 ordinary share numbered 141,680 with effect from 7th August 1998;
	(2)	the Applicant may be authorised to effect the necessary alterations in the said Register of Members for carrying such Order into effect; ...”

2.Mr Yuen and Ms Yuen have, by summons dated 6 March 2006, applied to strike out these proceedings on the grounds that they are vexatious or otherwise constitute an abuse of the process.  Alternatively, they seek an order for the permanent stay of these proceedings, on the basis that any action it discloses is inappropriate for summary jurisdiction and is in any event time-barred.

The background to these proceedings and this application

3.TAL was incorporated in Hong Kong in 1953.  In 1986, TAI was incorporated in the BVI to act as the holding company of various subsidiaries.  It was, for a period of time, listed on the NASDAQ stock exchange in the United States.  Mr Yuen was, until its liquidation, the sole director of TAI.  Following the incorporation of TAI, TAL became a wholly owned subsidiary of TAI, which held 153,999 of its 154,000 issued shares, the remaining share being held by Mr Yuen, apparently on trust for TAI.  It appears to be common ground that TAL was the principal operating entity within the TAI group of companies, and could therefore be regarded as one of the major assets of TAI.

4.Apart from its interest in TAL and other subsidiaries, TAI also held (from about April 1988) a 14.4% stake in a company called Nam Tai Electronics, Inc. (“Nam Tai”), which was also listed on the NASDAQ stock exchange.  TAI and Nam Tai were subsequently (in about September 1993) to become involved in hostile litigation relating to a rights issue that Nam Tai proposed to make.  In November 1993, TAI pledged its shareholding in Nam Tai in favour of the Bank of China, to secure a guarantee which TAI had given in respect of a loan made by the Bank of China to TAL.  Thereafter, in May 1996, a charging order was made in respect of TAI’s shareholding in Nam Tai in favour of the Irish government, which had obtained a judgment against TAI in other proceedings.  In June 1997, Nam Tai purchased the Irish government’s judgment debt, and having obtained an assignment of it, used it as the basis for presenting a winding up petition against TAI in the BVI shortly afterwards, on which a winding up order was made in July 1998.

5.Meanwhile, on 15 May 1996, TAI executed a stock pledge agreement with Mr Yuen (apparently acting as trustee for a company called Strategic Holdings Limited (“Strategic”), a company of which Mr Yuen appears to be a major shareholder and a director), by which it pledged its shareholding in TAL to Mr Yuen (as trustee for Strategic) to secure a loan of US$3 million to be made to TAI and/or TAL.  Further, on 7 February 1997, TAL entered into a debt conversion agreement with Mr Yuen, again acting as trustee for Strategic, by which a loan of US$3 million to TAL should be convertible into additional shares in TAL, whereupon the loan would be deemed to be repaid.  It is not clear on the evidence presently available whether these agreements related to a single loan or set of advances or two separate loans.

6.In December 1998, Nam Tai amended its articles of association to give itself power to redeem shares held by shareholders who were indebted to it, and relying on the amended articles, redeemed part of TAI’s shareholding in Nam Tai.  A further part of TAI’s remaining shareholding in Nam Tai was redeemed by Nam Tai in 2002.

7.On the winding up of TAI in the BVI, Mr David Hague was appointed as its liquidator.  While acting as such liquidator, Mr Hague was involved in litigation against Nam Tai, seeking to challenge the validity of Nam Tai’s redemption of part of TAI’s shareholding in Nam Tai.  These proceedings are currently the subject of an appeal to the Privy Council.  Nam Tai in turn applied for the removal of Mr Hague as liquidator, and brought claims against him for damages for negligence.  Mr Hague resigned as liquidator of TAI in 2002, after which the Applicant was appointed as TAI’s liquidator on 11 July 2003.

8.Apart from the litigation involving Nam Tai, Mr Hague also commenced proceedings in respect of TAL in Hong Kong in October 1998, seeking the convening of an AGM to enable TAI to remove the existing directors of TAL (Mr Yuen and associates of his) so as to bring TAL under his control.  These proceedings, however, stalled when Ms Yuen filed evidence showing that TAI was no longer a shareholder of TAL, as TAL’s Register of Members showed that TAI had ceased to be a shareholder on 7 August 1998, when its shares were transferred to Mr Yuen, and Mr Yuen’s share was transferred to Ms Yuen.  Ms Yuen’s evidence also disclosed that there had been an increase in TAL’s issued share capital on 13 July 1998, when 170,000 new shares were issued to Mr Yuen.  Although directions were given for the filing of further evidence in relation to this matter, no further evidence was filed, and the proceedings became dormant.  According to the evidence filed in these proceedings by the Applicant, this was thought to have been because of a lack of funding at that time for the further conduct of those proceedings.

9.Meanwhile, TAL had itself gone into liquidation on 10 January 2001, a petition for its winding up having been presented on 23 October 2000.  The 1^st Respondents were appointed its liquidators.  It appears that TAL’s liquidators also suffer from a lack of funding, as TAL appears to be insolvent and without assets of any real significance.

10.Following the appointment of the Applicant as liquidator of TAI, the Applicant identified TAI’s shareholding in TAL as an asset in relation to which investigations should be made, it being his understanding that TAL had, prior to its liquidation, been a substantial operating company.  Having secured funding from Nam Tai, the Applicant initially made an application in the winding up of TAL, seeking an order pursuant to section 219of the Companies Ordinance that he should be entitled to inspect the books and records of TAL.  The purpose of that application was to enable him to obtain information as to TAL, as to which he had very limited knowledge, he and his predecessor having, according to the reports filed with them with the BVI court in connection with TAI’s liquidation, obtained no cooperation from Mr Yuen.  That application came before me on 30 August 2005.  It seemed to me that, given the current state of the Register of Members of TAL, the Applicant, not being recorded as a member of the company, was not then in a position to maintain the application, which was accordingly adjourned sine die in order to enable the Applicant to consider whether or not an application should be made for the rectification of TAL’s register, so as to establish its status as a contributory and thus its locus to make the application for inspection.

11.That led to the present proceedings being commenced by Originating Summons issued on 5 January 2006.

The evidence which has been filed

12.A number of affidavits and affirmations have been filed in these proceedings.  For the Applicant, an affirmation supporting his application under section 100 of the Ordinance was filed by his Hong Kong solicitor, Mr Keith Ho.  That affirmation set out substantially the background which I have summarised above, and referred to the fact that it was in the course of the earlier 1998 proceedings by the Applicant’s predecessor that it was discovered that Mr Yuen had caused TAL’s share capital to be increased in July 1998 and had also caused TAI’s shareholding in TAL to be transferred to himself in August 1998.  Mr Ho says that he is informed by the Applicant’s BVI legal advisers that BVI insolvency law is similar to that of Hong Kong, and goes on to say that on being wound up, TAI was divested of the beneficial interest in its assets, which came under the control of its liquidator.  He also points out that the transfer of shares took place after the making of the winding up order in respect of TAI in the BVI, and refers to conflicting BVI legal opinions as to the validity of the transfer.  He also explains the purpose of these proceedings, and the earlier application for inspection as being to enable the Applicant properly to discharge his duties, as liquidator of TAI, to investigate its affairs and recover its assets, and for this purpose, to be informed as to the position of TAL and have some say over its winding up.

13.Apart from Mr Ho’s affirmation, two further affidavits were filed on behalf of the Applicant by Mr Anthony Lynton, his BVI legal adviser.  The first deals with a point as to the Applicant’s authority to bring these proceedings, and the second deals with the effect under BVI law of TAI having been struck off the register of companies in the BVI for the period between 1 November 2001, when it was struck off, and 10 May 2006, when it was restored.  Each of these points had been raised in the evidence filed on behalf of Mr Yuen and Ms Yuen.

14.For the Yuens, a total of five affirmations were filed.  The first was an affirmation of Mr Christopher Short, one of their solicitors.  This indicated that affirmations of the Yuens were being prepared (although, in the event, neither of the Yuens have to date themselves made any affirmations in relation to these proceedings).  It also suggested that the proceedings were not properly constituted, in that the Applicant, rather than TAI, was the applicant, and because TAL was not made a party, and that the matter was not suitable for summary determination under section 100 of the Ordinance.  A second affirmation by Mr Short suggested that the matters raised in this application had previously been raised in the 1998 proceedings, and sought to reserve the Yuens’ right to put in further evidence to make this good if necessary, after the court files in relation to the 1998 proceedings were available.  Mr Short’s third affirmation simply set out the current position in relation to the 1998 proceedings, which was that they had not progressed since about November 1998, when directions were given for the filing of evidence and for the matter then to be fixed for hearing.  Two affirmations were also filed by Ms Cheonghar Wong.  The first exhibited various annual reports of Nam Tai which described the litigation between Nam Tai and TAI in relation to the 1993 proposed rights issue, and in the course of TAI’s liquidation.  The second exhibited BVI company registry records indicating that TAI had been struck off the register for the period referred to in paragraph 13 above.

The 2^nd and 3^rd Respondents’ contentions

15.Against this background, Mr Brewer, appearing for the Yuens, made the following submissions at the hearing:-

(1)	The application should be struck out because the Applicant did not have standing to make this application since TAI did not exist at the time that the proceedings were commenced, having been struck off the BVI register of companies on 1 November 2001, and not having been restored to the register until shortly before the hearing.
(2)	The application should be struck out as being vexatious because the Applicant could not obtain the relief it appeared to wish in the light of the order applied for by his Originating Summons, which simply sought the striking out of the Yuens’ names in respect of the shares mentioned in the Originating Summons, but did not seek the restoration of TAI to the register of members of TAL.  Even if the Originating Summons were to be amended to seek such restoration, Mr Yuen would remain a shareholder in respect of 170,000 shares, and would thus be able to resist the Applicant’s objectives.
(3)	The application should also be struck out as being vexatious on the grounds that even if the it were successful, it would not give the Applicant a right to inspect the books and records of TAL, as this could only be obtained if the court were to exercise its discretion to permit inspection.  As to this, having regard to the fact that TAL had been in liquidation for over five years, and its liquidators did not expect any return to be achieved for creditors, permitting inspection would not be for the proper purposes of TAL’s liquidation or be otherwise of utility.  Moreover, TAI’s major creditor was Nam Tai, whereas TAL’s major creditor was the Bank of China, and their interests were or might well be in conflict.
(4)	Further, the application should be struck out as being an abuse of process, having regard to the fact that this was the third application brought for the same purpose - to enable TAI’s liquidator to obtain information about TAL and its winding up.  The Applicant had not put forward any grounds to justify revisiting the matters raised in the 1998 proceedings which had been allowed to become dormant.
(5)	The application was also an abuse of the process having regard to the fact that its confessed purpose was an improper one - namely, to have some say over the winding up of TAL.  It was again pointed out that Nam Tai’s interests were in conflict with those of the Bank of China, and that Nam Tai’s interest in TAI’s liquidation was artificially brought about by Nam Tai’s acquisition of the judgment debt against TAI, and it was submitted that these should lead the court to conclude that these proceedings were being pursued for a collateral purpose and could give rise to what was described as a wrongful interference with the duties of TAL’s liquidators.
(6)	It was also submitted that:-
	(a)	these proceedings were not suitable for summary determination under section 100 of the Companies Ordinance;
	(b)	while rectification could be ordered after a company had gone into liquidation, the court would be more cautious in exercising its discretion to order rectification in such a situation;
	(c)	the substantial delay since the transfer of shares now complained of, which was known to the Applicant’s predecessor since November 1998, meant that an order for rectification would not be at all likely to be granted; and
	(d)	any claim against Mr Yuen, which would have to be the basis on which rectification was sought, would be statute barred, since any acts of his of which complaint was or would be made happened more than 6 years ago.
(7)	Finally, it was submitted that these proceedings should either be stayed, leaving the Applicant to seek to set aside the transfer of TAI’s shareholding in TAL to Mr Yuen by fresh proceedings brought by writ, or alternatively, that there should be directions given for the matter to proceed by way of pleadings.

16.It will be noted that these arguments do not include the two points raised in Mr Short’s first affirmation concerning the Applicant’s standing to bring these proceedings and the necessity for TAL to be made a respondent to them.  As it seemed to me that these were points that should have been addressed, I invited the parties to provide further written submissions on these points.  Such submissions were received on 21 June 2006, with short reply submissions being lodged by the parties on 28 June 2006.  The effect of the submissions made on behalf of the Yuens was that both of these points were taken as further reasons for striking out the proceedings as currently constituted.

Effect of striking off of TAI from the BVI companies register

17.In relation to the question of the effect of the fact that TAI had been struck off the register of companies in the BVI between 1 November 2001 and 10 May 2006, Mr Chan submitted that the matter was conclusively dealt with by the provisions of the BVI companies legislation, which (like Hong Kong’s ordinance) provide (by section 100(3) of the International Business Companies Ordinance) that on restoration to the register following payment of outstanding fees, the company was deemed never to have been struck off or dissolved.  It seems to me that this is right.  Moreover, it appears from Mr Lynton’s second affidavit that the provisions of the BVI statute under which TAI was struck off do not apply to companies in liquidation (see paragraph 5 of Mr Lynton’s second affidavit, and sections 99(11) and 105 of the BVI statute which he refers to).  In these circumstances, I do not think that there is anything in this point.  Even if the striking off of TAI from the BVI companies register was valid (which would appear to be open to question), having been restored to the register prior to this hearing, TAI is deemed never to have been struck off.  That being so, it is deemed to have been in existence throughout the period from 1 November 2001 to 10 May 2006, and this point does not assist the Yuens.

Failure to specify precise orders sought

18.I consider next the argument that the proceedings are vexatious because the relief effectively sought by the Applicant is not expressly claimed in the Originating Summons which has been issued, so that even if the proceedings were to be resolved in favour of the Applicant, he would not be in a position to pursue his application to inspect TAL’s books and records pursuant to section 219 of the Ordinance.  It seems to me that this is a point more of form than of substance.  It is quite clear, as Mr Chan submitted, that the objective of the application is to enable the inspection application to be proceeded with, and Mr Chan indicated that the amendments to the register of TAL’s members that was sought was for TAI to be restored to the register in relation to the 154,000 shares previously registered in its name.  In my view, this formal defect can be easily remedied by an amendment to the Originating Summons which specifies the nature of the entries to the register that are sought to be made on the striking out of the names of the Yuens as registered shareholders of the shares in question.  The point is not one which justifies the striking out of the Originating Summons and dismissal of these proceedings.

19.I would accept, however, that it would be desirable for the precise relief sought to be spelt out, and with this in mind, will require the Applicant to seek leave to amend the Originating Summons to do so.

Alleged ability of Mr Yuen to resist the Applicant’s “stated intentions”

20.As for Mr Brewer’s further submission that, even if the relief sought was (as Mr Chan said it was) to restore TAI to the register of members of TAL, with the ultimate objective of pursuing the application for inspection which was brought in August 2005, Mr Yuen, as the holder of 170,000 shares in TAL, would be able to “resist the Applicant’s stated intentions”, I have some difficulty in seeing how this can be the case.  If TAI were to be restored to the register of members of TAL, it would thereupon have locus to pursue an application for inspection under section 219 of the Ordinance.  The fact that a shareholder of the company in respect of which inspection was sought, who had a larger shareholding than the shareholder seeking inspection, might be opposed inspection being ordered would not prevent the application being made, even if it might, in an appropriate case, be a matter for the court to take into account in deciding whether or not to order the inspection sought.

Application vexatious because it could serve no useful purpose?

21.As to the suggestion that the application should be struck out as being vexatious because even if successful, it would not give the Applicant a right to inspect the books and records of TAL, as this depended on the court exercising its discretion to order such inspection under section 219, it seems to me that this submission ignores the fact that the purpose of the present proceedings is to put TAI into a position where it will at least have the necessary standing to make such an application.

22.Whether or not an order for inspection should be made in relation to TAL is a matter which arises for consideration in the context of the section 219 application.  I do not think that it can be said at this stage that such an application would be bound to fail.  Whether or not an application for inspection must serve the purposes of the liquidation, or merely be of some more general utility, is not, in my view, a matter which requires to be decided at this stage.  However, I should say that I am not prepared to accept that simply because the liquidators of TAL have indicated that it has no assets, and they have no funds, that there could be no purpose to the inspection that is sought.  There is no evidence presently before the court as to the steps which have been taken by the liquidators of TAL.  It is unclear whether they have made any investigation into the affairs of TAL, whether they have considered whether there are any potential claims that might be made which might result in some worthwhile recovery for the company, and if so, what they have done about such claims, and how far they have progressed (if at all) before being brought to a halt by the liquidators’ lack of funds.  In these circumstances, it may be that there is utility in the inspection application, particularly if it leads to funding being provided for the investigation (or more extensive investigation) by TAL’s liquidators of its affairs.

Alleged conflict between interests of Nam Tai and Bank of China

23.As to the further suggestion that Nam Tai and the Bank of China are in a situation where their interests are in conflict, while I can see that this may be so in the context of the TAI liquidation, given the argument that has arisen over the validity of Nam Tai’s redemption of TAI’s shareholding in it, notwithstanding the Bank of China’s prior charge, I do not see that it necessarily follows that their interests are also in conflict with one another in the context of the TAL liquidation.  This is because, in the TAL liquidation, Nam Tai would be a creditor of a contributory (assuming the application for rectification of TAL’s register is ultimately successful), and I would have thought that interests of creditors and contributories of TAL were broadly similar, in that both would wish to maximise the assets available for distribution.

24.For these reasons, I do not think that this argument provides a basis for striking out the present proceedings as being vexatious.

Abuse of process because an attempt to relitigate matters previous litigated?

25.As to the argument that these proceedings are an abuse of process, being a third attempt by TAI’s liquidator to litigate essentially the same matter, that is simply not the case, and ignores the fact that each of the three sets of proceedings is different in nature.  The 1998 proceedings sought to convene an Extraordinary General Meeting of TAL so as to enable the then liquidator of TAI to remove TAL’s then directors and take control of TAL, which was at the time TAI’s main asset.  It was clearly premised on TAI being the major (indeed, only) shareholder of TAL.  Once it was discovered that this was not the case, the liquidator, even if he had had funds, would have had to have considered whether or not to take steps to challenge the transfer and obtain a rectification of the register because even if the register were to be rectified, it would not enable him to take control of the company unless the issue of the additional shares to Mr Yuen was capable of challenge and was challenged.  In the absence of funding to pursue this matter, it is not particularly surprising that the matter was not pursued.

26.To have sought the rectification of the register for the purposes of enabling the 1998 proceedings to proceed (a course similar to that which has been taken now in order to enable the 2005 proceedings for inspection to proceed) would probably have required separate proceedings to have been commenced, seeking rectification of TAL’s register of members.  That being so, the failure to pursue rectification of the register in those proceedings does not, in my view, make the present proceedings an abuse of the process.

27.Still less, I think, does the existence of the August 2005 proceedings for inspection render the present proceedings an abuse.  It was the bringing of those proceedings, and the court’s decision that the register had to be rectified (if it could be) before TAI could have locus to apply under section 219 that brought about these proceedings.  It cannot possibly be said that the issues that might be raised here should have been ventilated there.

28.In these circumstances, I am unable to see that there is any abuse of the process in this sense in relation to these proceedings, and do not consider that this argument justifies the striking out of these proceedings.

Abuse because of desire to have some say in the context of TAL’s liquidation?

29.As to the other basis for saying that these proceedings are an abuse of the process, I am again unable to see that this is the case.  It is true that the applicant has said (through Mr Ho) that the purpose of the proceedings is (inter alia) to enable him to have some say in respect of the TAL liquidation.  But it does not follow that this is improper, and that to take proceedings to enable this to happen would be an abuse.  I have already explained why I do not consider that there is any conflict between the interests of Nam Tai and the Bank of China in the context of the TAL liquidation.  Moreover, the statement that the Applicant wishes to be in a position to have some say over the liquidation must, I think, be understood in the context of his desire to obtain information about the affairs of TAL.  It seems to me that it is perfectly proper for him, as TAI’s liquidator, to wish to investigate and obtain information as to what is considered to be an asset of TAI’s.  While it is true that TAL is in insolvent liquidation, there may nonetheless be legitimate concerns about the circumstances in which TAI’s was divested of its shareholding in TAL, and as to what has or has not been done in the TAL liquidation.

30.As I have already noted, there is no information concerning this before the court.  If it were to transpire that the TAL liquidators were so hampered by the lack of available funds that they have done little or no investigative work, and have not considered or been able to pursue any proceedings which might restore value to TAL, it might well be justifiable for TAI to seek to inform itself of the status of TAL and its liquidation and to consider whether or not it should provide funding (if able to do so) to enable investigations or recoveries to be pursued.

31.I do not think that I can or should infer from the limited information which is presently available that these proceedings are being pursued for some collateral and improper purpose such as to render them an abuse.  Nor do I think that they would necessarily result in any interference with the work of TAL’s liquidators (which, so far as they are concerned, has apparently come to an end).  In any event, seems to me that all of these are matters which are more appropriately considered in the context of an application for inspection, if it is possible to make one in the light of the outcome of this set of proceedings.

Other points

32.As to the remaining points made by Mr Brewer at the hearing:-

(1)	It is not clear at this stage whether this is a matter that is suitable for summary determination.  Up to now, despite indications to the contrary at the earlier stages of these proceedings, the Yuens have declined to put forward their factual case as to the circumstances in which TAI came to be divested of its shareholding in TAL.  It is therefore not clear whether or not there are likely to be any disputes of fact arising.  If, following the filing by the Yuens of such evidence as they wish to put forward, issues of disputed facts arise for consideration, it seems to me that the court can at that stage give appropriate directions to enable such issues to be resolved, whether by directing the filing and service of pleadings, or by making orders requiring deponents to attend for cross-examination so as to enable the court to come to a view on such matters.
(2)	As to the fact that TAL is in liquidation, Mr Brewer accepted that this did not prevent the court from exercising its power under section 100 of the Companies Ordinance.  Although it is true that in Re Onward Building Society [1891] 2 QB 463 the English court was not prepared to exercise its jurisdiction under the equivalent of section 100, the facts of that case were, Mr Chan pointed out, quite different from those here, in that this is not a case of a person acquiring shares in a company after it has gone into liquidation (which might be viewed with some reserve on the part of the court), but a case of a shareholder wishing to rectify the register in respect of an allegedly wrongful removal of his name from it.  In these circumstances, I do not think that, even though the court might be somewhat more cautious in the exercise of its discretion to rectify the register of a company in liquidation, it can be seriously contended that it would be bound to refuse the remedy in this case.
(3)	As to delay, Mr Brewer said in the course of his submissions that this was not really relied upon as being in itself a ground for striking out, but was raised more by way of response to the suggestion that the earlier proceedings were not pursued because of lack of funds.  While there has been considerable delay, and this may be a factor that will have to be taken into account at the end of the day in deciding whether or not to grant relief in these proceedings, I cannot say at this stage that the delay is such as to be completely determinative of the matter against the Applicant.
(4)	As to the suggestion that rectification would be refused because any cause of action against the Yuens on the basis of which it might be ordered would be statute barred, I do not think that it is possible to come to a concluded view as to this at the present stage of these proceedings.  Although it is tolerably clear that rectification is sought on the basis that the transfer of the shareholding of TAI in TAL to Mr Yuen was improper, it is not entirely clear what the legal basis of such an allegation is.  This may be due to the lack of information which presently exists as to the circumstances of the transfers, and may become clearer if the Yuens file substantive evidence in relation to them.  Mr Chan suggested that the claim would be based on trust, perhaps on the basis that Mr Yuen would, following the wrongful transfer, have held the shares registered in his name as trustee for TAI, which would result in a longer limitation period than six years.  Whatever the precise basis of the claim may be, however, it seems to me that it is not possible to say at this stage that it is incontestably bad by reason of the availability of a limitation defence.

Does the Applicant have locus to apply under section 100?

33.I turn now to consider whether or not the Applicant has locus to make this application under section 100 of the Ordinance.  It is to be noted that the Applicant is not TAI itself, but its liquidator.  Mr Brewer submits that the Applicant is not able to bring this application, because he is not a “person aggrieved” within the meaning of section 100.  Mr Brewer submits, relying on Yip Peter v Asian Electronics Limited [1998] 2 HKC 96, that as the Applicant could not be substituted as a member of TAL in place of the Yuens, assuming the application to be otherwise successful, he cannot be a “person aggrieved” for the purposes of section 100.  In that case, a person who was indirectly interested in the company whose register he sought to have rectified was held not to be entitled to make the application under section 100 of the Ordinance.

34.Mr Chan submits that the Applicant is clearly a person aggrieved, having regard to his position as liquidator of TAI, which has, he says, been wrongly removed from the register of members of TAL.  He suggests that TAI could clearly have been an applicant, and that there is no reason for its liquidator not to be permitted to make the application on its behalf.

35.In my view, the construction of section 100(1) adopted by Le Pichon J in the Yip Peter case is clearly correct.  I think that the answer to this question can be discerned as a matter of the proper construction of the subsection, which provides:-

“	(1)	If –
		(a)	the name of any person is, without sufficient cause, entered in or omitted from the register of members of a company; or
		(b)	default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member;
		the person aggrieved, or any member of the company, or the company, may apply to the court for rectification of the register.”

36.From the concluding words of the subsection, it will be apparent that the only persons who can apply are (a) the person aggrieved, (b) any member of the company and (c) the company itself.  The Applicant can only bring himself within the subsection if he can show that he is “the person aggrieved”.  However, it is to be noted that the subsection provides, not that any person aggrieved may apply under it, but the person aggrieved.  In my view, that choice of words restricts the right to apply to the person who is aggrieved by virtue of being the person referred to in either of paragraphs (a) or (b).  That is to say, it is only the person whose name is entered into or omitted from the register of members, or in respect of whom there has been delay in entering on the register the fact of his having ceased to be a member, who can apply under section 100(1) for an order for rectification of the register.  Had it been intended to afford the right to apply under the subsection to a wider group of persons, it seems to me that it would have been necessary to refer to “any person aggrieved”.

37.The Applicant is clearly not such a person.  The only relevant person whose name has been omitted from the register in this case is not the liquidator, but TAI, the company in liquidation.  Although Mr Lynton said in his first affidavit that on liquidation, the company was divested of the beneficial interest in its property, that would seem to indicate that it remained possessed of the legal title to its property, albeit it was no longer free to deal with its property as it might choose to, given that the statutory scheme for distribution of its property in favour of its creditors would have come into force.  I do not understand him to suggest that the property of the company in liquidation actually vested in its liquidator, as would be the case in relation to a bankrupt and his trustee in bankruptcy.  This view of the matter is, to my mind, reinforced by the fact that in the 1998 proceedings, the applicant seeking the convening of a meeting of the members of TAL was not its then liqudator, but TAI itself, the company in liquidation.

38.Similarly, the only person whose name could be entered in the register in place of Mr Yuen in respect of the shares which are the subject of this application would, in my view, be TAI, and not its liquidator, for the foregoing reasons.

39.Some support for this conclusion is also provided by the case of Kent v La Communaute des Soeurs de Charite de la Providence [1903] AC 220, in which it was held by the Privy Council that in principle, a liquidator should sue in his own name where he acts as representative of creditors and contributories, and in that of the company where it is sought to recover its debts or its property.  Here, the application seeks in effect to restore to TAI its own property.

40.In the circumstances, I am of the view that the Applicant is not a competent applicant for the purposes of section 100(1).  However, it seems to me that the defect is largely one of form, and it would be right to afford the Applicant the opportunity to amend the proceedings so that they are brought not by him personally, but by TAI.  In this regard, I do not accept that there is any reason to think that the authority given to the Applicant by the BVI court to take legal proceedings in the name of and on behalf of TAI has been curtailed.  There is no evidence to suggest that this is so, and it seems to me that the use of the liquidator’s personal name, rather than that of the company, could well be an innocent error.

Should TAL be made a respondent?

41.Finally, it is necessary to consider whether or not TAL should have been made a party to these proceedings.  Support for the view that it should have been can be found both in the Hong Kong Civil Procedure at para 102/3/3 and Boyle & Marshall’s Practice and Procedure of the Companies Court at para 5.5.  It seems to me that both of the reasons given in the Hong Kong Civil Procedure for making the company a party, namely that its register of members may have to be amended, and to represent the interest of the other members other than those directly affected by the application, suggest that it is necessary for the company whose register is the subject matter of the application to be made a party.  While it is true that the rectification of the register, if ordered, would be carried out in this case by the liquidators, it does not follow that the company should not be made a party.

42.While the question is not an easy one, I think on balance that it would be appropriate for the company to be made a party to these proceedings.  It is true that this would necessitate an application being made under section 186 of the Companies Ordinance, for leave to join TAL as a respondent to these proceedings.  However, I see no reason why such an application should not be made at the same time as an application to amend these proceedings.  Equally, given that the liquidators have taken a neutral stance to these proceedings, and given that I have concluded that, apart from the amendments which I have indicated should be made, the proceedings should not be struck out, it seems to me unlikely that such leave would be refused.

Disposition and costs

43.In the circumstances, I think that the proper order to make would be to give the Applicant leave to make an application within, say, 42 days, to amend the proceedings so as to spell out the precise relief sought, substitute TAI as the applicant, and add TAL as a respondent.  Directions should also be sought at the same time for the further conduct of the proceedings.  If, however, no such application is made within that time, or such further time as may be agreed between the parties or allowed by the court, the proceedings will be struck out.

44.So far as the costs of the proceedings are concerned, the position is that while the Yuens have had a limited measure of success, they have failed in their attempt to strike the proceedings out altogether.  Moreover, their success has been mainly in relation to matters which were canvassed in the further written submissions, and not in relation to matters which were argued at the hearing of their application.  In these circumstances, I think that the appropriate order as to costs would be to order that the Applicant should bear half of the 2nd and 3rd Respondents’ costs of the application in any event, but that there should be no order as to costs in respect of the hearing before me on 25 May 2006, and I make an order nisi to that effect.

Mr Anthony Chan, SC leading Mr Bernard Mak, instructed by Messrs Wilkinson & Grist, for the Applicant

1^st Respondent:  Tam King Ching Kenny and Shum Lap Chi, The Joint and Several Liquidators of Tele-Art Limited (In Liquidation) (Absent)

Mr John Brewer, instructed by Messrs Weir & Associates, for the 2^nd and 3^rd Respondents