Hai Hiu Chu and Another v. Bamboos Professional Nursing Services Ltd

HCMP 522/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 522 OF 2014

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BETWEEN

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R E A S O N S  F O R  J U D G M E N T

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1.This is the second application made by the applicants for relief pursuant to s 122 of the Companies Ordinance, Cap 32 (“Predecessor Ordinance”).  Although the Predecessor Ordinance has been substantially repealed and renamed “Companies (Winding Up and Miscellaneous Provisions) Ordinance” since 3 March 2014 by virtue of the commencement of the new Companies Ordinance, Cap 622 (“Ordinance”), it will be explained below that s 122 of the Predecessor Ordinance continues to apply in these matters.

2.The applicants are the only shareholders and directors of Bamboos Professional Nursing Services Ltd (“Company”).  They are seeking to rectify their defaults in the compliance with s 122 of the Predecessor Ordinance in that they have failed to lay the profit and loss account and balance sheet of the Company for the year ended 30 June 2012 (“2012 Audited Accounts”) at an annual general meeting (“AGM”) held not more than 9 months after the period covered by those accounts.  This application is not opposed by the Company.

3.The background to the previous application can be gleamed from the Decision of G Lam J dated 30 January 2013.  By virtue of that decision, the applicants were allowed to lay the 2010 and 2011 Audited Accounts of the Company at an AGM to be held on 31 March 2013.

4.It was apparently intended by the applicants that the 2012 Audited Accounts would also be laid at the 31 March 2013 AGM and that would be consistent with their duties under s 122.  However, those accounts could not be prepared in time for that AGM due to the change of auditors and company secretary.  The changes were made because the previous auditors and company secretary did not serve the Company well in light of the defaults in complying with s 122.

5.I am quite satisfied that, subject to the applicability of s 122, this court should exercise its discretion in favour of granting the relief sought herein.  There is no prejudice to the shareholders. The applicants have all along been the only two shareholders and directors of the Company since it was acquired by them as a shelf company in May 2009. Clearly, they were and are aware of the financial position of the Company.  The defaults here are inadvertent.  Further, I am sure that the applicants have learned an expensive lesson and it is unlikely that they will neglect such duties in the future. 

6.Turning to the applicability issue.  One starts with Part 21, Division 1 (Consequential and Related Amendments), s 912 of the Ordinance.  S 912 provides that the amendments to enactments are specified in Schedules 9 and 10.  Under s 59 of Schedule 9, s 122 of the Predecessor Ordinance has been repealed.  S 122 has been replaced by s 429 of the Ordinance which applies to financial year beginning on or after the 3 March 2014 (see s 358(1)(e)).

7.Therefore, one needs to turn to the transitional provisions – Schedule 11 of the Ordinance.  Pursuant to s 913 of the Ordinance, that schedule sets out the transitional and saving provisions.  Part 9, s 78 of Schedule 11 provides that, inter alia, s 122 of the Predecessor Ordinance continues to apply in relation to accounts for a financial year beginning before the commencement date of Subdivision 3 of Division 4 of Part 9 and ending on or after that commencement date.  The 2012 Audited Accounts do not come within s 78.

8.Next, I have to consider the saving provision of s 914(1) of the Ordinance, which states as follows :

“(1) This section applies if a provision of the predecessor Ordinance is repealed by section 912 but has a continuing effect under Schedule 11, or by virtue of section 23 of the Interpretation and General Clauses Ordinance (Cap. 1), or both, after the repeal.”

9.I then turn to s 23 (“S 23”) of the Interpretation and General Clauses Ordinance, Cap 1, which provides as follows :

“Where an Ordinance repeals in whole or in part any other Ordinance, the repeal shall not -

(a) revive anything not in force or existing at the time at which the repeal takes effect;

(b) affect the previous operation of any Ordinance so repealed or anything duly done or suffered under any Ordinance so repealed;

(c) affect any right, privilege, obligation or liability acquired, accrued or incurred under any Ordinance so repealed;

(d) affect any penalty, forfeiture or punishment incurred in respect of any offence committed against any Ordinance so repealed; or

(e) affect any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty, forfeiture or punishment as aforesaid; and any such investigation, legal proceeding or remedy may be instituted, continued or enforced, and any such penalty, forfeiture or punishment may be imposed, as if the repealing Ordinance had not been passed.”

10.Ms Chan, who appeared for the applicants, had helpfully referred this court to In re A Debtor [1936] 1 Ch 237 where the court considered the English statutory equivalent of S 23 (in all likelihood S 23 is based on the English provisions) and said at pg 241 :

“That Act was passed to simplify the work of drafting Acts of Parliament and to shorten them by enacting in general form certain standard provisions which should apply under every Act subsequently passed, except where any particular Act contained provisions to the contrary.”

11.I agree with Ms Chan that S 23(c) is engaged because the “obligations” in question under s 122 of the Predecessor Ordinance have been “accrued”. 

12.In Aitken v South Hams District Council [1995] 1 AC 262, the House of Lords considered the words “obligation” and “liability” under the equivalent English provision and it was held at pg 271D-G that those words embraced both civil and criminal obligation or liability :

“… although the application of section 16(1)(d) is confined to the criminal field, I do not consider that this means that the words “obligation or liability” referred to in section 16(1)(c) have to be regarded as being restricted to a civil obligation or liability.  The words remain appropriate to cover an obligation or liability enforceable under the criminal law.  While a “right” and “privilege,” which are also referred to in section 16(1)(c), have a distinctly civil flavour, this is not equally true of “obligation” and “liability.”  It is perfectly possible for the same enactment to create an obligation or a liability which is both enforceable in a civil action, by a claim for damages, and by a criminal sanction.  It would be strange if, in that situation, section 16(1) could preserve the obligation or liability so far as it was enforceable in a civil action, but not so far as it was enforceable in criminal proceedings.  To my mind the important question is whether there is an obligation or liability rather than how that obligation or liability is enforced.  The question of enforcement is dealt with in section 16(1)(e) and that provision clearly applies equally to civil and criminal enforcement.”

13.I should add that the defaults in question attract criminal sanction under s 122(3) of the Predecessor Ordinance.

14.Finally, I also accept Ms Chan’s submission that by virtue of S 23(e) these proceedings have been properly brought.

15.In these premises, I made the order sought in the originating summons dated 6 March 2014 as amended.

Ms Joyce Chan, instructed by Troutman Sanders, for the 1^st and 2^nd applicants

The respondent was not represented and did not appear