Killenny Ltd. and Others v. Attorney General
Read the full judgment text of CACV 157/1995 on BabelCite. This Court of Appeal judgment was delivered on 20 October 1995.
1. This is yet another interlocutory appeal which comes before this court. The appeal itself falls within a narrow compass, but it has thrown up a fundamental point on jurisdiction which we need to deal with.
Cited by 5 cases
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CACV000157/1995 IN THE COURT OF APPEAL 1995, No. 157 - Headnote - Section 47(1) and (2) Securities (Disclosure of Interests) Ordinance, Cap. 396 - right of persons "beneficially interested in the shares" to have money paid into court pursuant to an order for sale made under s46(4) paid out to them - In an application for payment out the Financial Secretary has no locus standi nor has the Attorney-General - The judge had no jurisdiction to order that the Financial Secretary be joined as a party to an application for payment out - The Court of Appeal's inherent jurisdiction to discharge orders made without jurisdiction exercised. IN THE COURT OF APPEAL 1995, No. 157 ______________
______________ Coram: Hon Litton, V.-P., Godfrey and Liu, JJ.A. Dates of hearing: 19 and 20 October 1995 Date of judgment: 20 October 1995 ________________ J U D G M E N T ________________ Litton, V.-P.: 1. This is yet another interlocutory appeal which comes before this court. The appeal itself falls within a narrow compass, but it has thrown up a fundamental point on jurisdiction which we need to deal with. 2. By the notice of appeal, we are asked in effect to do two things:
3. To avoid confusion, it would be best to refer to the appellants as the three companies and the respondent to this appeal as the Attorney-General. 4. The proceedings in the court below concerned an application made by the three companies that a fund in court, representing the proceeds of the sale of shares which they say they owned beneficially, be paid out to them. The Registrar of the Supreme Court determined that application in the three companies' favour, but the Attorney-General appealed. The directions which the judge declined to make on 31 May 1995 concerns the conduct of that appeal. Background 5. To understand why this appeal has been brought some background facts need be stated. 6. The history of the matter goes back to 1990 when 66% of the shares in a publicly listed company, World Trade Centre Group Limited (WTC), was disposed off. Tomson Pacific Limited acquired 34.5% of the shares, the balance of 31.5% (419,950,000 shares) was to be taken up by an independent third party. 7. In June 1993 the Financial Secretary appointed an inspector under section 33(1) of the Securities (Disclosure of Interests) Ordinance, Cap. 396, to investigate and report on the membership of WTC for the purpose of determining the true persons who were or had been financially interested in the success or failure (real or apparent) of the company, or able to control or materially to influence its policy. That investigation, relating to the 419,950,000 shares, failed to reveal the true ownership as to 179,420,000 shares representing about 9.8% of the issued capital of the company. The three companies, registered in the British Virgin Islands, claimed to be the beneficial owners of those shares. 8. As a result of the inspector's report the Financial Secretary, on 8 July 1993, exercised his powers under s41 of the Ordinance and imposed restrictions on dealing in those shares. Application for order removing restrictions and sale 9. On 9 November 1993 WTC took out an originating motion for an order under s46(4) that the restrictions imposed by the order of the Financial Secretary be removed and that the shares cease to be subject to the restrictions, for the purpose of a sale of the shares to a company called Rovtec Investments Ltd. Having regard to what transpired in the court below, it is necessary to set out in full the provisions of s46(4):
10. As can be seen, the High Court's powers on entertaining such an application are wide and if the restrictions on dealing are to be removed by the court's order, the Financial Secretary, who had imposed those restrictions in the first place, must obviously be heard. 11. The 179,420,000 shares in WTC were registered in the names of three bank nominee companies. 12. When the notice of originating motion was taken out by the company for the orders for removing the restrictions and for sale, the parties to that motion were respectively the Attorney-General, the proposed purchaser, and the three bank nominees in whose names the shares were registered. It was understood by everyone that the Attorney-General was a party to the motion representing the Financial Secretary. 13. Rogers J heard the motion over two days (12 and 15 November 1993) and expressed himself satisfied that in the "public interest" and in the interest of the shareholders of WTC the order for sale should be made and the restrictions lifted. 14. Those proceedings were entitled HCMP No. 3870 of 1993. I have no doubt whatever that once the restrictions were removed and the order for sale was made, those proceedings were finally concluded. Nothing else was then pending. The proceeds of sale 15. As far as the proceeds of sale were concerned, s47(1) requires that they be paid into court. This is a consequence which follows by the operation of law and, technically, even if the order for sale were silent on the point, this consequence would have followed. 16. The disposal of the proceeds of sale are governed by s47 which, where relevant, states:
17. As can be seen, on an application for an order for payment-out, the only matter of concern to the High Court is whether the applicant is a person "beneficially interested in the shares". If he is, the court shall order the payment to the applicant. This is a pure question of the applicant's right of property. No element of discretion is involved. And - this needs stressing - where the applicant is a corporation, the question as to the identity of the "true persons" who control the corporation or are able "materially to influence its policy" is wholly irrelevant. The right to the money in court, which is a matter of pure property right, is totally unaffected by the personality of the corporation and the identity of the persons behind the corporate veil. Even if the corporation be "as elusive as the Cheshire cat", to use Lord Denning MR's expression in Third Chandris Corporation v. Unimarine [1979] 3 WLR 122 at 128, so long as it is a person recognised as such in law, it is entitled to the money. 18. This fundamental point, seemingly lost sight of in the court below at times, gave rise to much of the grievances ventilated by the three companies, through counsel, in this court. The three companies' application for payment out 19. On 28 June 1994 solicitors for the three companies took out a summons in HCMP No. 3870/93, returnable before a Master in chambers, for an order for the payment out to them of the whole of the proceeds of sale. The parties to that summons were respectively WTC, the three bank nominees and the Attorney-General. This was supported by an affirmation of Mr Sung Tze-chun with an address in Taiwan. Mr Sung produced documents concerning the registration of the three companies in the British Virgin Islands and copies of documents to show how he became the sole director of the three companies on 19 November 1993. As for the 179,420,000 WTC shares, Mr Sung deposed as follows:
20. He produced management accounts of the three companies which were consistent with his assertion that the shares belonged beneficially to the three companies. He also said that each of the companies purchased their shares in WTC in July 1990 by borrowing the whole of the purchase price from their respective shareholders and the resulting shareholders' loans were outstanding except to the extent of repayments out of the income derived from the shareholdings. This is likewise reflected in the financial statements. 21. The matter went before Mr Registrar Betts in chambers who, on 6 July 1994, ordered that the whole of the proceeds of sale lodged in court be paid out to the three companies. The course of the proceedings 22. As was pointed out in the course of the hearing before us, the proceedings for payment-out were on the wrong track from the start. Under Order 92 rule 5(2) of the Rules of the Supreme Court, an application must be by originating summons unless it is made in a pending cause or matter. There was, on 28 June 1994, when the solicitors took out the summons, no pending cause or matter. HCMP No. 3870/93, commenced by the notice of originating motion dated 9 November 1993, was concluded with Rogers J's final order: removing the restrictions on the shares and ordering sale of those shares to Rovtec Investments Limited. The three companies were not parties to those proceedings. For the solicitors, seven months after those proceedings had concluded, to have taken out a summons in those proceedings was clearly wrong. The Attorney-General was made a party 23. Moreover, to have made the Attorney-General a party to the summons was also wrong. The Attorney-General had no competing claim to the money, and represented no-one with such a claim. The solicitors however cannot be blamed for this. The reason for joining the Attorney-General lies in the terms of the order for sale dated 15 November 1993 which contained the following:
24. This was fundamentally wrong. Rogers J had no jurisdiction to make any such order, because the Financial Secretary had no locus standi in an application under s47(1). The Financial Secretary was, of course, a necessary party to HCMP NO. 3870/93, since the core of the relief sought by the company was the removal of the restrictions on dealings imposed by the Financial Secretary on that parcel of shares in the first place. But once the order for sale was made on 15 November 1993 and the restrictions were removed, the Financial Secretary had no shadow of interest left in the matter. 25. It is not for us to say whether the order of 15 November 1993 was rightly made or not, and I make no comments on whether the judge could or should have used his powers under s46(4) of the Ordinance to decline to remove the restrictions on the shares: thereby using that statutory provision in effect as a "lever with which to prise open the casket in which the relevant facts about the shares were hidden", to borrow this expression from the judgment of Nourse LJ in Re Geers Gross Plc. [1987]1 WLR 1649 at 1653. There could be strong arguments both ways. There was the "public interest" in discovering the identities of the "true persons" who ultimately stood behind the three companies, but there might have been an equally strong case for saying that it was not in the interest of the shareholders as a whole, and particularly the minority shareholders, that a parcel of shares representing nearly 10% of the share capital should remain sterilised forever. 26. But, right or wrong, the restrictions were lifted. The shares were transferred to the ownership of Rovtec Investments Ltd. The Financial Secretary thereafter had no shadow of interest in the proceeds of sale, and had no locus standi in any application for the payment-out. The appeal under Order 58 27. Once the proceedings for payment-out started off on the wrong track, error was piled upon error. On 11 July 1994 the Attorney-General (having been made a party to the summons) lodged a notice of appeal under Order 58 r1 of the Rules of the Supreme Court appealing against the Registrar's decision to a judge in chambers. Order 58 r1 is silent as to the procedure on such an appeal, but the practice of the courts for decades has been to treat the matter as though it came before the judge for the first time, following the English practice in this regard. But the appellant has both the right and the obligation to open the appeal. And this created another problem. The Attorney-General had no positive case of any kind to put forward. The bank nominees in whom the legal title to the shares vested at the time of sale never contested the three companies' beneficial ownership of those shares. They were, at all times, holding those shares to the respective company's account. No one else was claiming ownership. The Attorney-General was not representing any party who claimed ownership. In short, he should never have been in the proceedings at all. His case was, throughout, that he was "putting the claimants to proof of their beneficial interests". It was difficult to see in these circumstances how he was going to be able to open the appeal. The material before the Registrar, on its face, was sufficient for the Registrar to have made the order he did. The judge gave directions 28. The long protracted history of the proceedings shows that the parties, in the procedural maze in which they found themselves, were groping towards a solution. There was an attempt to challenge the Attorney-General's locus standi but this was abandoned. Eventually, a consent order was made, on 16 September 1994, giving directions for the further conduct of the appeal. The directions were as follows:
29. These are odd directions to give in an appeal. The three companies, technically respondents to the appeal, became the plaintiffs and the Attorney-General, the appellant, became the defendant. This was, in effect, an attempt to put the proceedings on the right track, treating the proceedings as if they had been commenced by an originating summons. And of course if the proceedings had been by originating summons they would have gone before a judge. The application would not have been heard by the Registrar in chambers and there would never have been an appeal to a judge in chambers in the first place. 30. What the judge in the court below failed to see was that, in truth, there was no issue between the parties and there was nothing for him to try. He cannot be blamed for this, because the parties failed likewise. Take for instance para (4) of the directions: mutual discovery: What relevant documents had the Attorney-General to disclose? And take para (6): exchange of witness statements: What witnesses was the Attorney-General going to call on that appeal? 31. Following those directions, pleadings were lodged. In answer to a request for further and better particulars of the defence, the Attorney-General stated:
32. That being the position, it might be legitimately asked: Why was the Attorney-General there as a party at all? The hidden agenda 33. What the three companies complain of in the appeal before us, in essence, is this: Whilst, on the face of it, the proceedings were in name an "appeal" against the Registrar's order for payment-out of the proceeds of sale, in truth, there was an ulterior motive: to use - and misuse - the proceedings to complete the work the inspector had failed to accomplish and by means of the proceedings to "prise open the casket" in which the identities of the ultimate shareholders of the three companies lay hidden. Mr Mills-Owens, QC, points to a passage in Rogers J's decision dated 11 October 1994, explaining the reasons why he sanctioned the directions made by consent, as follows:
34. Mr Mills-Owens, QC argues that this is a clear indication that the judge, in hearing the "appeal", was not going to confine the "issue" to that of beneficial ownership of the shares. These concerns seem to me justified. The application for directions 35. On 9 May 1995 the three companies took out a summons returnable before Rogers J for directions, purportedly under Order 25 r7(3), in these terms:
36. Counsel says that para (3) is the crucial direction which his clients seek. A modified direction, seeking to confine the "issue" to beneficial ownership of the shares, was put to the Judge in the course of argument before him. In my view, these are not directions that come within the scope of Order 25 of the Rules of the Supreme Court and the judge was right to decline to make them. The appeal from the judge's order refusing to give those directions is, in my judgment, misconceived. Reason for removing of the judge from further conduct of the case 37. The three companies through counsel assert that the judge had adopted such a misguided and hostile attitude towards them and their claim to the money that he should be removed from further conduct of the matter. In the course of argument we referred counsel to s13(2)(a) of the Supreme Court Ordinance which defines the scope of the civil jurisdiction of this court in entertaining appeals from judgments and orders of the High Court. We asked counsel what order of the judge lies behind this so-called application. There was none. This is not a situation where the judge had been asked to disqualify himself and upon his refusal the appellant appeals that order. We are asked to exercise an original jurisdiction to remove the judge from further conduct of the proceedings. No such jurisdiction exists. 38. Moreover on the material before us I would not have made any such order even if the jurisdiction were there. A judge who expresses his views concerning the merits or demerits of a point in the course of a hearing is not necessarily biased in favour of or against the particular party. If a judge is robust in the management of the business of his court he might well arouse the resentment of one or more of the parties. This is far from judicial misbehaviour of the kind that warrants the intervention of this court. The jurisdiction point 39. Having regard to what I have said earlier, how should this appeal be disposed off? I revert to the question of jurisdiction. The flaw which has run through the entirety of the proceedings in the court below, leading to the bizarre directions which the companies asked the judge to make and are now under appeal, spring from a fundamental mistake. 40. The Financial Secretary had no locus standi in the application made under Order 92 r5 of the Rules of the Supreme Court for the payment-out. 41. The question of the locus standi of the parties to proceedings goes to the jurisdiction of the court and where the court has no such jurisdiction the parties are not entitled to confer such jurisdiction on the court by consent. In this regard we were helpfully referred by counsel to the case of R v. Secretary of State for Social Services ex parte Child Poverty Action Group [1989]1 All ER 1047 at 1056. 42. What then should this court do when a situation like this has become apparent in the course of the appeal before us? 43. In this territory we have the ultimate responsibility for the proper administration of civil justice and when it becomes clear that a judge of the High Court, in an order he made, has exceeded his jurisdiction we have a duty to interfere. 44. Mr Mills-Owens, QC has this morning made an application to us for an order that the three companies be joined forthwith as parties in the originating motion, with a view to an appeal against Rogers J's order of 15 November 1993 ordering that the Financial Secretary be joined as a party to the s47(1) application, on the ground that the judge had no jurisdiction to make such order. 45. We have invited Mr Mitchell, QC to address us on the jurisdiction point and it is quite clear to me that there is absolutely no answer to the point that Mr Mills-Owens has advanced. That being so we should, in my judgment, exercise our inherent jurisdiction to protect the court process and deal with the matter upon our own responsibility and on our own motion. 46. In my judgment we should exercise our inherent powers to do the following things:
47. It follows that the order made by the judge under appeal namely his order of 31 May 1995 refusing to give the directions as sought by the three companies will be set aside. The effect of all this is that there is no competent appeal before this court. 48. I propose that a minute of order embodying the orders I have proposed be drawn up by the solicitors representing the appellants and forwarded to the Attorney-General for comment to be returned by the Attorney-General within 48 hours and thereafter submitted to my clerk for approval. 49. The minute of order should contain a provision that there should be a stay of the order for payment-out for 14 days. If within 14 days an application for leave to appeal to the Privy Council be made the stay should continue until that application for leave has been heard or until further order. Godfrey, J.A. : 50. I agree; but since the order proposed by my Lord, the Vice-President, is an order we propose to make of our own motion, I will add a few words of my own. 51. The Crown does not claim to be beneficially interested in the funds in court which the appellants, having established their title, seek to have paid out to them. Mr. Mitchell, Q.C., instructed on behalf of the respondent, was unable to point to any (at any rate, any legitimate) interest of the Crown which would make either the Financial Secretary or the Attorney General a necessary or proper party to the appellants' application for payment out. No question of the Crown's prerogative, or its relations with foreign states, or anything of that sort is involved; the appellants' application concerns only their title to the funds in court, a matter exclusively of private right. With this, neither the Financial Secretary, nor the Attorney General, has anything to do. 52. In these circumstances, the order of the Judge requiring the Financial Secretary to be joined in that application was made on a false assumption as to his locus standi and so was made in excess of jurisdiction. My Lord the Vice President, has referred in this connection to R. v. The Secretary of State for Social Services and another ex parte Child Poverty Action Group and others [1989] 1 All ER p.1047. The relevant passage appears in the judgment of the court given by Woolf, L.J. in which he says this (at p.1056) :-
53. In our case, once the Judge's order that the Financial Secretary be joined in the appellants' application for payment out was made, and he was joined accordingly, all the subsequent proceedings were improperly constituted. It is no wonder that they have got into an impossible tangle. I agree with my Lord, the Vice President, that in these circumstances it is the duty of the court to step in summarily and decline further to entertain the proceedings: see Sir Isaac Jacob's valuable article entitled "The Inherent Jurisdiction of the Court" in [1970] Current Legal Problems 23, especially at p.39. 54. The role of the Attorney General is sometimes misunderstood, as it has been here. The right of the Attorney General to intervene, in the public interest, in private litigation is limited to the protection of the Crown prerogative. The fact that the funds in court in this case derive from an order made in proceedings (now spent) to which the Financial Secretary was properly made a party does not give the Attorney General any right to intervene in the subsequent proceedings for payment out. 55. There is one further authority (not cited to us) to which I would refer. It is the Duke of Bedford v. Ellis [1901] AC 1. In that case, several plaintiffs sued on behalf of themselves and all others the growers of fruits, flowers, vegetables, roots and herbs within the meaning of the Covent Garden Market Act, 1928, to enforce various preferential rights to stands in the market, which they alleged to have been given to the class of growers by the Act. The defendant was the lord of the market. In the Court of Appeal, it was ordered (in effect) that the Attorney General be added as a defendant in these private proceedings. The observations of Lord Macnaghten in that case, at pp.11 and 12, demonstrate that these problems are not easy, and that the parties in our case were in good company in misconceiving the role of the Attorney General. Lord Macnaghten says as follows:
56. I would ask a similar question in our case. What is the Attorney General to do on the appellants' application, when there is no issue to be tried as between him and the appellants? The court has already expressed itself satisfied as to the appellants' title to the funds in court. 57. The answer of Mr. Mitchell Q.C., that the appellants should be put to strict proof of that title, is no answer at all, first, because that matter is the business of the court, not the business of the Attorney General, and secondly, because the appellants have already done it anyway. 58. In my judgment, we must step in ourselves and put these misconceived proceedings to an end, by making an order on the lines my Lord, the Vice-President, has proposed. Liu, J.A.: 59. The two issues in this appeal are whether further directions sought should have been granted by Rogers, J. and whether the appeal from the Registrar should be proceeded with in a different venue. Demands made of Rogers, J. at short notice under a relatively new piece of legislation were heavy. He expressed surprise at the submission of Mr Tang that s.47 of the Securities (Disclosure of Interests) Ordinance was a wholly detached phase in the sale to Rovtec Investments Limited. What had fallen from the judge, orally and in print, was at times robust but in no way can he be said to have given the impression that he had decided the issues on the ordered pleadings, in effect dispensing with the need to hear arguments yet to be advanced upon them. 60. As for the further directions, the judge simply declined to order them at that particular juncture. In view of the consensus reached on the necessity for defining issues by pleadings, it was open to the judge to control the proceedings before him in the way he did by refusing to order then the further particulars sought by the appellants. The judge said at the conclusion of counsel submissions on 31 May 1995:
61. The two-pronged attack of the appellants fails. I would dismiss the appeal. This is, in my judgment, how the hearing of the instant appeal should be brought to a conclusion. 62. In my view, whomever and whatever interests the Attorney General represents, the entrenchment of the Attorney General as a joined party through all the stages in these proceedings cannot be readily uprooted. Issue has been joined with the Attorney General on the pleadings filed by consent. The appellants' summons placed before us only this morning faces grave practical and legal hindrances. The judge puts us on notice that there is or may be an element of public interest. The legislation under consideration is relatively recent. The inter-relationship between s. 46 and s. 47 requires to be more closely examined in the proper context of the Ordinance. The sum involved is very substantial. The Financial Secretary and Attorney General . would appear to have genuine concerns. Full and well-structured submissions would be, on my part, welcome. Mr Mitchell, leading counsel for the Attorney General is evidently less than prepared and he seeks a deserving period for research, realignment and consultation. The Attorney General is unmistakenly desirous of addressing this court fully. I would refuse to entertain the appellants' summons and their consequential fresh Notice of Appeal to be filed in this court and at this stage. 63. This court has widely-ranged inherent jurisdiction, but in the circumstances it cannot be right to invoke that power under the rubric of abuse of the court process to which, it is said, the judge, the Financial Secretary, the Attorney General and counsel hitherto concerned were instrumental, with the view to circumventing the foreseeable difficulties in the appellants' intended application. On any view of a matter of this nature, the matter should best be allowed to run its natural course.
Representation: Mr Richard Mills-Owens, QC & Ms Maria Yuen (M/S Vincent T.K. Cheung, Yap & Co.) for Claimants/Appellants Mr Denis Mitchell, QC & Mr Nicholas C.H. Bradley, SCC (A.G.'s Chambers) for Respondent/Respondent |
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