Re Automatic Vending Co Ltd

CACV000102/1982

Headnote

Company law - s.178(a) of the Companies Ordinance (Cap. 32) - a statutory demand to found a petition under that section is not effectual if it is made by more than one creditor where debts are severally owed and none of them exceeds $5,000 - in the context of the legislation, s.7(2) of the Interpretation and General Clauses Ordinance (Cap. 1) is not applicable.

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Coram: Hon, Leonard, V.-P., Cons and Fuad, JJ.A.

Date: 26 October 1982

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JUDGMENT

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Fuad, J.A. :

1. This is an appeal from an Order made by Liu J. on the 16th July 1982 dismissing a petition for the compulsory winding-up of the Hong Kong Automatic Vending Machine Ltd. ("the Company").

2. The matter arose in this way. On the 20th March 1982 five former employees of the Company served a notice, purportedly under s.178(a) of the Companies Ordinance (Cap. 32), upon the Company demanding various sums said to be due to them in respect of arrears of wages, overtime and wages in lieu of notice. Each of three claims was for $3,332, one was for 3,232 and one for $3,000, making a tota1 of $16,228.

3. On the 29th March 1982 the five former employees filed the same claims in the Labour Tribunal. The Tribunal gave judgment on admissions made by the Company in their favour in sums totalling $6,237 in relation to their claims for arrears of wages and overtime allowances on the 27th April 1982. The judgment debts were settled by the Company by the 26th May 1982. Meanwhile, on the 1st May 1982, the petition with which we are concerned was filed. To complete the chronology it is necessary to add that when the employees' claims relating to wages in lieu of notice were due to be resumed before the Tribunal on the 27th May 1982, the Presiding Officer decided to adjourn further proceedings pending the outcome of the winding-up petition.

4. The petition was presented by three of the five men on the grounds that the Company "is insolvent and unable to pay its debts". They repeated the claims set out in the statutory demand.

5. When the petition came before Liu J. he decided that the debts were bona fide disputed and that the petition should be dismissed on that ground. He also expressed the tentative view that the demand relied upon for the purposes of s.178(a) was ineffectual -

"The petitioners jointly served a notice under s.178 of the Companies Ordinance, which requires of, as opposed to the explicit language of s.6(1)(a) of the Bankruptcy Ordinance, a creditor of a limited company, a minimum debt of $5,000. It would seem that the joint notice served by the petitioners who claim less than $5,000 individually was ineffective for s.178."

6. As might be expected, one of the grounds upon which a company can be wound up by the Court is if it is "unable to pay its debts" (s.177(e) of the Companies Ordinance). The next succeeding section is in these terms -

"178. A company shall be deemed to be unable to pay its debts -

(a) if a creditor, by assignment or otherwise, to whom the company is indebted in a sum exceeding $5,000 then due, has served on the company, by leaving it at the registered office of the company, a demand under his hand requiring the company to pay the sum so due, and the company has for 3 weeks thereafter neglected to pay the sum, or to secure or compound for it to the reasonable satisfaction of the creditor; or

(b) if execution or other process issued on a judgment, decree or order of any court in favour of a creditor of the company is returned unsatisfied in whole or in part; or

(c) if it is proved to the satisfaction of the court that the company is unable to pay its debts, and, in determining whether a company is unable to pay its debts, the court shall take into account the contingent and prospective liabilities of the company."

7. Mr. Keane submitted that a demand made by more than one creditor satisfied the provisions of s.178(a) of the Companies Ordinance notwithstanding that the debts were severally owed and were each less than $5,000, provided they totalled a sum exceeding $5,000. He prayed in aid s.7(2) of the Interpretation and General Clauses Ordinance (Cap. l) which provides that "words and expressions in the singular include the plural and words and expressions in the plural include the singular", contending that no contrary intention appears form the context to exclude the operation of the subsection. In part, s.2(1) Cap. 1 is as follows -

"2(1) Save where the contrary intention appears either from this Ordinance or from the context of any other Ordinance....... the provisions of the Ordinance shall apply...... to any other Ordinance in force..... ".

8. Mr. Keane drew our attention to the decision of the Full Court in Sin Poh Amalgamated (Hong Kong) Ltd. v. Attorney General of Hong Kong and Another [1963] H.K.L.R. 77 which was affirmed by the Privy Council at[1964] H.K.L.R. 877. The case concerned the construction of the Commissioner's Powers Ordinance in the light of the Interpretation Ordinance, both then in force. The latter Ordinance contained provisions which have precisely the same effect as those contained in ss. 2(1) and 7(2) of Cap. 1. The Sin Poh case was, of course, only cited to us for the general principles it establishes and we think it only necessary to refer to two passages in the judgment of the Privy Council delivered by Lord Pearce. At p.881 he said :-

"If an Ordinance refers to Commissioners" in the plural it is undoubtedly an alteration of its expressed intention if one reads it as referring to 'Commissioners or sole Commissioner'. But the mere reference to the plural is not sufficient to show 'a contrary intention'. If it were, then the Interpretation Ordinance would never apply at all."

9. And at p.882, Lord Pearce had this to say -

"The Interpretation Ordinance was intended to avoid multiplicity of verbiage and to make the plural cover the singular except in such cases as one finds in the context of the legislation reason to suppose that the Legislature, if offered such an amendment to the Bill, would have rejected it."

10. Mr. Keane asked us to construe the opening words of para. (a) of s.178 of the Companies Ordinance as if it read: "If creditors..... to whom the company is indebted in a sum exceeding $5,000 then due...". He expressly did not contend for a reading of this part of the paragraph that would alter the words "a sum" to the word "sums". It is plain why he did not do so. If creditors had to be owed "sums" exceeding $5,000, the ordinary sense of the paragraph must then mean that each creditor who joined in a demand was owed such a sum. In our judgment Mr Keane's submission that the Court should in effect be selective, by reading "creditor" to embrace "creditors", but not "a sum" to include "sums", does not help him. In our view, reading the provision in the way urged upon us would not alter the position. Against the background of the facts in this case, at the time of the statutory demand the intending petitioners, as creditors, were not owed "a sum" exceeding $5,000. To suggest that they were would surely necessarily imply that the Company was indebted to them jointly in such a sum. Without doing violence to the words employed, it could not be construed to mean that there were debts severally owed which exceeded $5,000 in the aggregate. It is instructive to contrast the wording used by the Legislature in s.6(1)(a) of the Bankruptcy Ordinance (Cap. 6) which covers such a situation in another area of the law relating to insolvency. To read s.178(a) in the way contended for on behalf of the appellants would be to re-write it and not to interpret it. We would add that we do not suppose for one moment that a Court could properly reject a petition based on a joint demand made by a number of creditors, to each of whom a company was indebted in a sum exceeding $5,000. No doubt the demands of all but one creditor would be ignored as otiose.

11. We do not think it irrelevant to refer to the very next section in the Ordinance (s. 179(1)) which expressly allows "any creditor or creditors... together or separately" to present a petition for winding up.

12. It seems clear to us that the Legislature meant what is said in s.178(a). It is one thing for a company to deal quickly with a demand for a debt (whether arising from a single transaction or a number of transactions) from a single creditor; it is rather different if the company has to deal with claims made upon them by a number of creditors.

13. The former employees have other remedies open to them. They can pursue their claims in the Labour Tribunal. If any of them succeed and are not paid, and execution is ineffective, they can rely on s.178(b). If they think they can satisfy the court that the Company is unable to pay its debts, s.178.(c) can be resorted to. In either case it does not matter how small the amounts involved might be.

14. We do not consider that the matter is capable of further elaboration. In our judgment the statutory demand for which provision is made in s.178(a) was invalid for the reasons we have given. It was conceded that if this were so, there being no other foundation for the petition, the petition was rightly dismissed, whether or not the Judge came to the correct conclusion regarding the existence of a bona fide dispute which would also have made a petition based on the section inappropriate.

15. We, therefore, dismiss this appeal.

Representation:

Mr. Desmond Keane, Q.C., with Miss Cathie Wong (Director of Legal Aid) for the appellant.

Miss Linda Siddall (Hampton, Winter and Glynn) for the respondent.