A A

HCMP 1887/2012
B B
IN THE HIGH COURT OF THE
C HONG KONG SPECIAL ADMINISTRATIVE REGION C

COURT OF FIRST INSTANCE

D D
MISCELLANEOUS PROCEEDINGS NO 1887 OF 2012
E ________________________ E

F IN THE MATTER of Joy Rich F

Development Limited (The
G “Company”) G

H and H

I IN THE MATTER of Section 86 of I

the Companies Ordinance, Cap 32
J ____________________ J

K BETWEEN K

L THE BUILDING AND LOAN AGENCY Plaintiff L

(ASIA) LIMITED
M M
and
N N
JOY RICH DEVELOPMENT LIMITED Defendant
O O
and

P REVELRY GAINS LIMITED Intervener P

____________________
Q Q

R Before: Deputy High Court Judge Le Pichon in Chambers R

Date of Hearing: 26 August 2014

S S
Date of Decision: 11 September 2014
T T

U U

V V
- 2 -
A A

B DECISION B

C C
1. This is an appeal out of time by Joy Rich Development
D Limited (now in liquidation) (“the defendant”) from an order of D

Master de Sousa dated 24 September 2012 (“the Order”) whereby he

E E
allowed an extension of time of 28 days for The Building and Loan
F Agency (Asia) Limited (“the plaintiff”) to register a floating charge dated F

26 January 2011 given by the defendant to the plaintiff subject to the

G G
usual proviso. At the conclusion of the hearing judgment was reserved
H which I now give. H

I I
CHRONOLOGY OF EVENTS
J J
2. The principal asset covered by a floating charge (“the
K charge”) created on 26 January 2011 is a valuable house on Middle Gap K

Road (“the property”) estimated to be worth $370 million as at 18 August

L L
2014.
M M

3. The present dispute is a consequence of the parting of ways

N N
between Chen Muhua (“Ms Chen”) and Liu Yi Dong also known as
O Lau Kwok Wah Benjamin or Ben Lau (“Mr Lau”) who previously had O

been living together at the property. The falling out apparently occurred
P P
in late 2011.
Q Q

4. On 26 January 2011 the plaintiff entered into a Loan

R R
Agreement (“the Loan Agreement”) with Greatstep International Ltd
S (“Greatstep”) as borrower and the defendant as guarantor. The loan S

advanced was $200,712,328.77, the repayment being 24 months from the

T T

U U

V V
- 3 -
A A

date of the loan or when called upon to repay by the plaintiff whichever
B B
was the earlier.
C C

5. As security for the loan, the defendant created a floating

D D
charge over all its assets. The charge provided that upon an event of
E default stipulated in the Loan Agreement, the floating charge would E

operate as a fixed charge. As earlier noted, the principal asset was the
F F
property although, as will become apparent, there were other assets.
G G

6. The sole shareholder of the defendant since 3 March 2009

H H
(which was well before the 2011 transaction) was and continues to be
I Ms Chen’s sister, Chan Yuen Wa (“YW Chan”). I

J J
7. YW Chan was also the sole director for the period from
K 3 March 2009 to about 1 September 2012 when she was replaced by one K

Lu Bo Huai (“Mr Lu”). Nevertheless, it is not suggested that she is no

L L
longer the sole shareholder.
M M

8. Despite being the defendant’s sole shareholder and for a time

N N
its sole director, YW Chan has filed an affirmation to the effect that the
O defendant’s operations were primarily handled by Ms Chen and Mr Lau O

and that she was not personally involved.

P P

Q 9. The loan was drawn down on 26 January 2011. Q

R R
10. Under section 80 of the old Companies Ordinance (Cap 32)
S if a charge created by a company is not registered within five weeks of its S

creation, then unless an extension under section 86 is granted, the charge

T T
is not enforceable against any liquidator. The primary obligation to
U U

V V
- 4 -
A A

register the charge lies on the chargor (the defendant) but any interested
B B
party may also make the application.
C C

11. The defendant did not register the charge within the five
D D
week period which expired on 2 March 2011 despite reminders by letter
E respectively dated 2 January 2011 and 22 February 2011 from the E

plaintiff.
F F

G 12. On 15 November 2011, upon realizing that the charge G

remained unregistered, the plaintiff took out an ex parte summons to

H H
register the charge out of time.
I I

13. On 17 November 2011, Master Lai made requisitions and

J J
remarks to the effect that the application had to be made inter partes,
K supported by an affidavit from an officer of the company setting out in K

detail the sequence of events and showing, inter alia, that the company
L L
was continuing to carry on business and that no winding up petition was
M pending. M

N N
14. The plaintiff called in the loan on 19 December 2011 and
O required repayment of the amount outstanding by 28 December 2011. O

P P
15. No repayment having been made, the charge crystallized on
Q 28 December 2011. Q

R R
16. On 5 January 2012, Kennedys (the plaintiff’s former
S solicitors) wrote to the defendant referring to the defendant’s and S

Greatstep’s failure to register the charge, requesting that the defendant

T T
execute a legal assignment of the charged property including the property
U U

V V
- 5 -
A A

pursuant to clause 2.02 of the deed of charge and, for that purpose, to
B B
provide a draft deed of assignment by 12 January 2012.
C C

17. There was a ‘holding response’ on 12 January from

D D
Greatstep to the effect that negotiations were under way with the plaintiff.
E The defendant did not reply. E

F F
18. On 12 January 2012, the plaintiff discontinued its ex parte
G summons to register the charge out of time. G

H H
19. Nothing came of the negotiations and by 2 February 2012,
I Kennedys demanded repayment of the loan and the provision of a draft I

deed of assignment by 8 February 2012. It received another holding

J J
response from Greatstep on that day but still nothing from the defendant.
K This caused the plaintiff to serve a statutory demand on the defendant on K

20 February 2012.
L L

M 20. The plaintiff then issued a certificate of crystallization on M

24 February 2012 and registered the same at the Land Registry on

N N
29 February 2012.
O O

21. On 14 March 2012, the plaintiff presented a winding up

P P
petition (HCCW 80/2012). The defendant maintained its silence. It
Q did not attend the hearing. Q

R R
22. Three months or so later, on 27 June 2012, the plaintiff
S applied for the appointment of provisional liquidators supported by the S

3rd affirmation (“So 3”) of So Yuen Leung (“Mr So”) one of its directors.
T T

U U

V V
- 6 -
A A

23. By that time, for reasons that will become apparent, the
B B
plaintiff decided not to proceed with the petition and the summons. As a
C result, both were dismissed on 9 July 2012. C

D D
24. The plaintiff issued an inter partes summons on 4 September
E 2012 to register the charge out of time. The summons was duly served E

on the defendant on 5 September 2012 at its registered office but the

F F
defendant did not appear at the hearing.
G G

25. On 24 September 2012 Master de Sousa made the Order

H H
granting a 28 day extension to register the deed of charge subject to the
I usual proviso that preserved the rights of creditors acquired between I

1 March 2011 and the date of registration.

J J

K 26. The Order was also duly served on the defendant on K

8 October 2012 and the charge duly registered with the Companies
L L
Registry on 19 October 2012 after the 14 day period for appealing the
M master’s order had expired. M

N N
27. As part of an internal restructuring, the plaintiff assigned its
O legal and beneficial rights in the loan agreement and charge to its wholly O

owned subsidiary Revelry Gains Ltd (“Revelry”) on 1 March 2013. A

P P
notice of assignment was sent to Greatstep and the defendant on 5 March
Q 2013. Q

R R
28. Seven months or more later, on 5 June 2013, Chan Yuen Wa
S (“Madam Chan”) presented a petition to wind up the defendant. S

T T

U U

V V
- 7 -
A A

29. A winding up order was made on 7 August 2012 and

B B
provisional liquidators appointed.
C C

30. On an ex parte summons dated 5 November 2013, the

D D
provisional liquidators applied for an order that they be appointed joint
E and several liquidators and that there should be a committee of inspection E

comprising three creditors namely YW Chan, Ms Chen and Pius

F F
Consulting Ltd (“Pius”). According to the list of creditors, Ms Chen’s
G claim was for approximately $132 million while that of Pius was, in the G

H
context, de minimis.
H

I 31. This was followed by a letter dated 13 November 2013 from I

the solicitors for the provisional liquidators applying for copies of court
J J
documents in HCCW 80/2012.
K K

32. The provisional liquidation appointed liquidators on

L L
6 December 2013 and the notice of appeal out of time was issued on
M 20 March 2014 after receiving senior counsel’s advice in February 2014. M

N N
THE APPLICATIONS
O O
33. Before the court are the following matters:
P P
(1) the defendant’s appeal issued on 20 March 2014 pursuant to
Q Order 58, rule 1 of the Rules of the High Court from the Q

Order which requires leave to appeal out of time;

R R
(2) the defendant’s summons dated 15 August 2014 as amended
S seeking leave to adduce additional evidence; and S

T T

U U

V V
- 8 -
A A

B (3) Revelry’s summons for leave to be added as the 2nd plaintiff B

in these proceedings.
C C

34. Revelry’s summons is uncontroversial. Accordingly, leave

D D
is granted.
E E

THE APPEAL
F F

(a) Whether time should be extended

G G

35. When the summons leading to the 2012 order was issued on
H H
4 September 2012, YW Chan was no longer the defendant’s director.
I While Mr Lu confirmed in his affirmation dated 15 August 2014 that he I

has been the defendant’s sole director since 1 September 2012, he merely
J J
stated that he never received the court documents referred to in the Order
K until they were very recently produced to him by Ms Chen. No K

information was provided as to whether he became involved in the

L L
defendant’s operations as a result of his appointment as director or what
M arrangements he had with Lily Tsang & Co (a secretarial services M

company) in relation to documents addressed to the defendant at its

N N
registered office. Mr Lu did not even state whether or not he was in
O Hong Kong at the relevant time or how much time he has spent here since O

P
his appointment.
P

Q 36. Ms Chen for her part sought to explain that notwithstanding Q

the falling out with Mr Lau at the end of 2011 after which Mr Lau was no
R R
longer involved in the defendant, she not only continued to handle the
S defendant’s operations as before, she continued to enjoy the services of S

T
the driver Mr Shek who, for some years, had been serving both Mr Lau
T

U U

V V
- 9 -
A A

and Ms Chen. In fact, she continued to use Mr Shek as her driver until
B B
the end of 2012.
C C

37. It is stated in §12 of her affirmation dated 19 March 2014

D D
that:
E E
“… it was not uncommon that Mr Shek would turn up at Lily
Tsang & Co’s office enquiring if there were any documents for
F F
[the defendant] and if so, collecting those documents on
[Ms Chen]’s behalf, when he served as [Ms Chen]’s driver. If
G Kennedys indeed served those court documents at Lily Tsang & G
Co on or about 5 September 2012 … I believe that Mr Shek
could well have collected those documents at Lily Tsang & Co
H and given to Mr Ben Lau or Mr Daniel So, who is an executive H
director of Hong Kong Building and Loan Agency Ltd, i.e. the
I ultimate shareholder of the plaintiff without letting us know. I
This might well also explain why those court documents were
then not drawn to my attention…”
J J

K 38. During September and October 2012 when the inter partes K
summons and the order were served on the defendant, on Ms Chen’s own
L L
evidence, Mr Shek was still serving as her driver. Given that fact, there
M is an apparent inconsistency in Ms Chen’s evidence if the first sentence M

quoted above is compared with the second. Having asserted that the
N N
documents would be collected on her behalf with the necessary
O implication that they would be handed to her, she changed her tune and O

‘speculated’ that having collected the documents, Mr Shek could well

P P
have given them to Mr Lau or Mr So.
Q Q

39. In view of the above, I consider Ms Chen’s evidence

R R
unreliable and entirely speculative, quite apart from the fact that no
S attempt appears to have been made to approach either Mr Shek or Lily S

Tsang & Co for them to give their account of what actually happened.
T T

U U

V V
- 10 -
A A

40. Mr Manzoni SC, senior counsel for the defendant, faced with
B B
the affidavits of service on the defendant, had to accept due service but
C sought to rely on the affirmations filed on the defendant’s behalf “to C

demonstrate” why the summons and the order did not come to the
D D
defendant’s attention and the reason why the defendant did not turn up at
E E
the hearing. In fact, the thrust of his submission was nothing short of

F
accusing Mr Lau of engaging in chicanery by causing Mr Shek (who was F
employed by one of Mr Lau’s companies) to collect the documents that
G G
had been duly served on the defendant and, instead of handing them to

H Ms Chen, caused Mr Shek to give them to either Mr Lau or Mr So. H

I I
41. In my view, the defendant’s evidence does not remotely

J
support the scenario Mr Manzoni was keen to have the court believe was J
what actually happened. I do not accept it. It was nothing more than
K K
sheer conjecture.

L L
42. As the defendant has not put forward a credible explanation
M M
for the delay in excess of 18 months or so in bringing this appeal, short of

N
demonstrating a strong case on the merits, the court’s discretion could not N
properly be exercised in the defendant’s favour. But before turning to
O O
consider the merits, it is necessary to deal with the admission of

P additional evidence. P

Q Q
(b) Admission of additional evidence

R 43. In her written submissions, Ms Linda Chan who appeared R

S
for the plaintiff objected to the admission of the additional evidence on
S
the basis that the defendant could not show that the Ladd v Marshall
T T
conditions were satisfied.

U U

V V
- 11 -
A A

44. As both parties made liberal references to the additional

B B
evidence at the oral hearing, it would appear somewhat pointless to rule
C on the objection at this stage. For present purposes, I propose to C

proceed on the basis that the additional evidence is part of the relevant
D D
evidence.
E E

(c) Merits of the appeal

F F

45. The gravamen of the plaintiff’s case is that Master de Sousa

G G
was deliberately kept in the dark when the Order was made as regards
H two important matters, namely, that: H

I (1) there had been a prior ex parte application that had been I

discontinued; and
J J
(2) the defendant was insolvent and unable to pay its debts at the
K time of the Order. K

L L
46. It was submitted that had the master been apprised of those
M matters, he would never have made the 2012 order because none of the M

grounds in Order 86 that would have justified an extension of time for

N N
registration would have been engaged.
O O

47. Mr Manzoni also invited attention to the fact that the hearing
P P
was a “two-minute hearing”, and that the master had been misled into
Q thinking that the defendant had “disappeared” when that was not the case. Q

R R
(i) non-disclosure of prior application
S S
48. As to the prior ex parte application, I cannot see its
T relevance when the hearing before Master de Sousa was an inter partes T

U U

V V
- 12 -
A A

one. The defendant was duly served and that fact must be determinative
B B
particularly as I have rejected the defendant’s explanation as to why it did
C not know about the hearing. C

D D
(ii) allegation that the defendant had ‘disappeared’
E E
49. After the ex parte hearing, in fact several attempts were
F made to contact the defendant without success: see Yeung 1, §§14-16 F

and 19. The defendant never answered any of the letters sent to it. It
G G
steadfastly ignored the letters sent to it by the plaintiff. On the evidence,
H while Ms Chen was allegedly the one handling the defendant’s operations H

at all material times, surprisingly, her affirmation was wholly silent as to

I I
the subsequent correspondence and the events that occurred between the
J end of 2011 and the dismissal in July 2012 of the winding up petition J

presented in March 2012.

K K

L 50. Moreover, So 3 described in some detail, inter alia, the L

events summarised in the preceding paragraph. At §42, Mr So stated:

M M

“Since issuing the Petition, staff members of the Petitioner have

N endeavoured to contact the Company on several occasions to N
enquire about various means by which the Loan might be
O repaid. This proved to be wholly unsuccessful on each and O
every occasion as we were unable to locate or speak to anybody
at the Company’s office address or contact number(s). It
P would seem that the Company has been, for all intents and P
purposes, abandoned.”
Q Q

51. He also commented (at §46) on the fact of the defendant had
R R
only one director, namely, YW Chan whose address was the defendant’s
S current registered office address but that: S

T T

U U

V V
- 13 -
A A

“…having tried on numerous occasions to locate [YW Chan] at

B that address and having made enquiries, she cannot be found B
and her present whereabouts are unknown.”
C C

52. In the circumstances described in the preceding paragraphs,

D D
in my view, to say that the defendant had “disappeared” was no
E exaggeration nor a misrepresentation of the truth. I do not consider that E

the master had been “misled” at all as the defendant sought to suggest.
F F

G (iii) jurisdiction G

H 53. In pertinent part, section 86 of the Ordinance reads: H

I “(1) The court, on being satisfied that the omission to register I

a charge within the time required by this Ordinance … was
accidental, or due to inadvertence or to some other sufficient
J cause, or is not of a nature to prejudice the position of creditors J
or shareholders of the company, or that on other grounds it is
K just and equitable to grant relief, may, on the application of the K
company or any person interested, and on such terms and
conditions as seems to the court just and expedient, order that
L the time for registration shall be extended, or, as the case may L
be, that the omission or mis-statement shall be rectified.”
M M

54. The court’s discretion may be exercised so long as one of the

N N
five distinct grounds set out is satisfied.
O O

55. The leading authorities on the subject of the court’s

P P
discretion in extending time cited to the court are In re Resinoid & Mica
Q Products Ltd [1983] Ch 132, In re Ashpurton Estates Ltd [1983] Ch 110 Q

and In re Braemar Investments Ltd [1989] 1 Ch 54. The principles that

R R
can be discerned from those authorities establish that:
S S
(a) once winding up of the company has commenced, it is
T normally too late to apply for an extension of time save in T

U U

V V
- 14 -
A A

B very exceptional circumstances: see Resinoid at 133G-H; B

and Ashpurton at 129H and 131F-G;
C C
(b) evidence that the company is solvent and that no winding up
D was impending is normally required: see Resinoid at D
133H-134A; and
E E
(c) imminence of liquidation of the company is a relevant factor:
F see Ashpurton at 131F. F

G G
56. Mr Manzoni relied on the plaintiff’s statutory demand,

H petition, application for the appointment of provisional liquidators, the H

fact that the loan has never been repaid and the plaintiff's belief that the
I I
defendant had disappeared in 2012 as supporting his submission that the
J plaintiff knew that the plaintiff was insolvent at the time of the 2012 J

application to register the charge out of time or, at any rate, that
K K
liquidation was then imminent. Reliance was also placed on the fact
L that the defendant was wound up in August 2013 on the basis of its L

insolvency. He submitted that in those circumstances the application

M M
plainly was made with a view to prejudicing the position of creditors or
N shareholders of the defendant. N

O O
57. The debate between Mr Manzoni and Ms Chan largely
P concerned the meaning of “imminence of insolvency”. It is obvious that P

the principles set out above have to be understood in the context of the
Q Q
facts of the case actually decided.
R R

58. In Ashpurton, the chargee (C) only took action to register

S S
three weeks after the receipt of a notice convening an EGM to be held to
T consider a resolution for a voluntary winding up. C’s application for an T

U U

V V
- 15 -
A A

extension of time to register the charge (which was heard only 12 days
B B
before the scheduled date of the EGM) was unsuccessful before the
C registrar. On the following day, C issued a notice of motion to vary the C

registrar’s order but later that same day the company went into
D D
liquidation. C’s motion was heard on 23 June and dismissed. C’s
E E
appeal met with the same fate.

F F
59. It should also be noted that in Ashpurton the application was
G not made until after C was put on notice of an imminent EGM convened G

H
with a view to putting the company into liquidation. Contrast Braemar
H
where the company was put into voluntary liquidation less than one
I I
month after the registration of charge. Hoffmann J rejected the

J
argument that at the time of the registrar’s order, the company was no J
longer a going concern. He stated (at 62C-F):
K K
“As a matter of strict law an application to extend time is not
L too late if the registration can be effected before the liquidation L
actually commences. The court may, as a matter of discretion,
on particular facts decide that it is too late at an earlier date, but
M the overriding question must be whether it would be just and M
equitable to grant the leave … Unlike the Resinoid case … no
notice of the meeting of creditors had been sent out and it
N N
certainly could not be said that it was only the prospect of
forthcoming liquidation which had alerted the applicants to the
O necessity for an extension of time.” O

P P
60. The issue of the defendant’s solvency and the plaintiff’s

Q awareness of its financial condition as at the date of the Order formed the Q
focus of Mr Manzoni’s submissions.
R R

S
61. As earlier mentioned, the nub of this appeal is whether at the S
time the Order was made, the plaintiff knew that the defendant was
T T
insolvent or that its liquidation was imminent but failed to disclose that

U U

V V
- 16 -
A A

fact to the court. The defendant accused the plaintiff of making its
B B
application to register the charge out of time with a view to prejudicing
C the position of creditors or shareholders of the defendant and that on the C

facts, the court’s jurisdiction under section 86 was not engaged.

D D

E 62. The inter partes summons was supported by an affirmation E

of Yeung Kwok Leung dated 4 September 2012 (“Yeung 1”). That gave
F F
a chronological account of the defendant’s failure to register the charge
G despite two reminders from the plaintiff; the plaintiff’s realisation in late G

H
2011 of the defendant’s failure to register; the calling in of the loan and
H
conversion of the floating charge into a fixed charge in December 2011;
I I
the putting of the defendant on notice of the crystallisation of the charge

J
in early January 2012; its subsequent registration at the Land Registry in J
February 2012 against the title to the property; service of a statutory
K K
demand on the defendant in late February 2012; the presentation of the

L petition upon non-satisfaction in March 2012; and the plaintiff’s L

subsequent decision not to proceed with the petition leading to the
M M
dismissal of the petition in July 2012.
N N
63. The defendant set great store by So 3 because, it was said, it
O O
“painted a picture of insolvency of the defendant”.

P P
64. Mr Manzoni gave a description of the contents of So 3 at
Q Q
§33 of his written submissions:

R “[Mr So] provided details of unsecured creditors of the R

Defendant and deposed that the debts owed to them remained
S unpaid. He agreed that the basis for the winding up of the S
Defendant was its insolvency. He detailed the steps which
Kennedys had taken in corresponding with Greatstep in early
T 2012 regarding the repayment of the Loan and in registering the T

U U

V V
- 17 -
A A

Charge on 29 February 2012. He also said that he was

B advised by Kennedys that the Defendant had filed a notification B
of change of address of the registered office dated 27 April
C 2012 with the Companies Registry. He quickly moved on C
with the application for provisional liquidators because the
Plaintiff became aware in about early March 2012 that the
D Defendant might have used the charged property to obtain other D
loans.”
E E
Those details were said to be crucial and were concealed from the master.
F F

65. But the fact of the matter is that Yeung 1 had made it
G G
abundantly clear, inter alia, that the plaintiff’s demand for repayment in
H late 2011 had not been met, resulting in the crystallisation of the charge H

and registration at the Land Registry against the title to the property and
I I
the fact of the service and subsequent non-satisfaction of a statutory
J demand resulting in the presentation of the petition. The financial health J

of the defendant was clearly drawn to the court’s attention. There is

K K
nothing in the point that the statutory demand and petition had not been
L L
exhibited.

M M
66. Further, according to So 3, the defendant’s known assets
N consisted of (a) the property recorded by the defendant in its June 2011 N

draft management accounts as having a value of $430 million as at

O O
30 June 2011 although a draft valuation report then yet to be finalised
P P
estimated the value to be $281 million in June 2012; and (b) money due

Q
and owing to the defendant by its debtors (“account receivables”) which Q
at 30 June 2011 stood at approximately $168 million but that they were
R R
unsecured. Based on information obtained at a meeting of creditors held

S
on 25 May 2012, in addition to the plaintiff, there were three other S
creditors including one (“King Perfection Limited”) for $20 million who
T T
subsequently admitted not to be a creditor. The defendant’s known

U U

V V
- 18 -
A A

indebtedness at that date including King Perfection’s alleged debt was

B B
approximately $347.655 million.
C C

67. So 3 then explained that the circumstances revealed by

D D
independent investigations and enquiries justified the appointment of
E provisional liquidators to protect and preserve the value of the E

defendant’s assets and to “potentially salvage it from the fate of a

F F
full-blown liquidation”:
G G
(1) the defendant’s questionable conduct in participating in
H several other loan transactions of the nature is similar to that H

with the plaintiff, granting security over the property but

I I
omitting to register the same with the Companies Registry
J and/or the Lands Registry so as to keep the title to the J
property free and clear of encumbrances;
K K
(2) the need to investigate the defendant’s affairs, assets and
L value in that the plaintiff had been unable to locate or speak L
to any responsible officer of the defendant; and
M M
(3) the need to preserve the defendant’s property and to
N maximise its realisable value with a view to avoiding a N
forced sale that would depress the price
O O

P
68. It will be seen from the evidence given of the assets of the P
defendant and the known creditors at the time of the application for the
Q Q
appointment of provisional liquidators in June 2012 that, while the

R
defendant had cash flow difficulties, its assets exceeded its liabilities even R
if the lower value is taken to be the value of the property.
S S

T T

U U

V V
- 19 -
A A

69. The minutes of the creditors meeting are informative. The

B B
creditors (having noted that having the defendant wound-up at that
C juncture and to proceed to realise the property through a forced sale C

would not be in the interest of any of the creditors) unanimously resolved,

D D
inter alia, that:
E E
(1) a provisional liquidator be appointed to replace the sole
F director of the defendant and to take over the management F

and the conduct of the defendant’s business and affairs etc;

G G
and
H (2) the petition to wind up the defendant be adjourned sine die H

with liberty to restore.

I I

J 70. Fairly read, the evidence shows that it was never the J

plaintiff’s intention to seek a winding up order of the defendant. The

K K
creditors including the plaintiff were anxious to put someone responsible
L in place to take charge of the defendant and its affairs given the inability L

of the plaintiff to locate any of the defendant’s responsible officers so that

M M
assets could be preserved and realised for the payment of outstanding
N debts. It would also appear from the evidence that the creditors were N

under a misapprehension as to how the winding up procedure operates

O O
and the role of provisional liquidators within that framework.
P P

71. I do not accept that the evidence establishes that the

Q Q
defendant was in fact insolvent whether on the date the petition was
R presented or at the time the application for the appointment of provisional R

liquidators was made or at the time the petition was dismissed.

S S

T T

U U

V V
- 20 -
A A

72. As earlier noted, on 5 June 2013, YW Chan presented a

B B
petition (HCCW 146/2013) to wind up the defendant which went
C unopposed. The winding up order was made on 7 August 2013. The C

Official Receiver became its provisional liquidator. On the same day

D D
Ms Lui Chau Yuet and Mr James Wardell were appointed the joint and
E E
several provisional liquidators in place of the Official Receiver.

F F
73. It is to be noted that the draft management accounts as at
G June 2011 list as one of the defendant’s assets “Director’s current G

H
account”, the amount involved being just in excess of $83 million. At
H
that point in time and indeed since 3 March 2009, YW Chan was the
I
defendant’s sole director and who, during her tenure as sole director, had I

J
shown zero interest in the defendant and its operations. But by 5 June J
2013, within a two-year period, YW Chan was able to transmogrify her
K K
status from that of debtor for $83 million to creditor for $1 million plus

L and present a petition to wind up the defendant based on an unpaid debt L

of approximately $1 million, that being the basis of the winding up order.
M M

N
74. While the winding up petition presented by YW Chan was N
the next relevant event, it did not happen until seven months or so after
O O
the date of the Order and its due service on the defendant. The winding

P up order itself was not made until August, almost 10 months after the P
registration of the charge.
Q Q

R
75. Since this appeal is a rehearing, I accept that the fact of the R
defendant’s liquidation is to be taken into account. Nevertheless, in the
S S
circumstances of this case, I do not consider that it could properly be said

T that there was any reason for the plaintiff to consider that liquidation was T

U U

V V
- 21 -
A A

imminent at the time the Order was made. I therefore reject the
B B
submission that the court had no jurisdiction to make the Order.
C C

(iv) prejudice
D D

76. Mr Manzoni also submitted that if the Order were allowed to

E E
stand, other creditors of the defendant would be prejudiced. But when
F asked to elaborate on the identity of such creditors, Mr Manzoni’s replied F

that they include “any and all unsecured creditors and it would also be
G G
any creditors who are secured over the assets that would be affected by
H any priority caused by the registration of the charge”. H

I I
77. The Order contained the usual proviso designed to protect
J the relevant creditors whose interests might be prejudiced. Paragraph 2 J

of the Order reads:

K K

“The order made under paragraph 1 is without prejudice to the

L rights of any creditors acquired between 1 March 2011 (being L
5 weeks prescribed by section 80(1) for registration of the
M
Floating Charge) and the date of registration pursuant to this M
Order.”

N N
78. Given that proviso, I confess that the class/classes of
O O
creditors Mr Manzoni was referring to that would allegedly be prejudiced

P
remain(s) obscure. None of the reasons raised by the defendant has P
merit. The conclusion is obvious.
Q Q

79. For good measure, in the event that this court were minded
R R
to set aside the Order (which it is not), Ms Chan submitted that the appeal
S S
should still be dismissed as it is of no utility or serves no useful purpose.

T
The contention is that the certificate of registration is conclusive evidence T

U U

V V
- 22 -
A A

that the requirement as to registration had been satisfied so that the charge
B B
is not invalidated as against the liquidators and the creditors of the
C company: Exeter Trust Ltd v Screenways Ltd [1991] BCC 477. C

D D
80. While it is strictly unnecessary to address this point given
E my conclusion that no valid basis has been shown for this court to set E

aside the Order, in deference to counsel’s submissions, I will deal with it

F F
briefly.
G G

81. Section 83(2) of the Ordinance (now section 344(4) of

H H
Cap 622) provides:
I I
“The Registrar shall issue a certificate with his signature or
printed signature, certifying the registration of any charge
J J
registered in pursuance of this Part, and the certificate shall be
conclusive evidence that all the requirements of this Part with
K respect to registration have been complied with”. K

L L
82. Mr Manzoni sought to argue that as the certificate was

M
premised on the Order, if the Order were set aside, there would be no M
valid basis for the certificate. In Exeter Trust, the English Court of
N N
Appeal rejected a similar argument. It allowed the appeal and set aside

O the order of the court below that had set aside the registrar’s order O
extending time for registration, explaining that the whole point of
P P
creating the register is to give security to people relying on the certificate.
Q It cited with approval Wilde v Australian Trade Equipment Co Pty Ltd Q

(1981) 145 CLR 590, 603-604 where the High Court of Australia held
R R
that the order extending time was beyond recall so soon as registration
S had been effected in reliance upon it: see also In The Matter of Top S

Marques Car Rental Ltd v In the Matter of the Companies Act 1985
T T
[2006] EWHC 109.
U U

V V
- 23 -
A A

83. In short, Mr Manzoni appeared to be resuscitating an

B B
argument that had been expressly rejected in Exeter Trust. For my part,
C I find the reasoning of the Court of Appeal in that case impeccable. C

D D
84. Mr Manzoni’s remaining argument was based on section 42
E of Cap 622, submitting that it provides the court with jurisdiction lacking E

in Wilde. Ms Chan’s answer was that Cap 622 (and thus section 42) has
F F
no application to the present case which pre-dates that ordinance. In any
G event, the power in subsection (3) arises only if there is no other power. G

H
As section 347 of Cap 622 confers power on the court to rectify the
H
register, section 42 is not engaged at all.
I I

85. Ms Chan’s analysis cannot be faulted. Were the

J J
conclusiveness issue material for present purposes, I would hold that the
K certificate of registration is conclusive and beyond recall. K

L L
CONCLUSION
M M
86. For all the reasons stated above, I conclude that the appeal is
N without merit. It is dismissed with an order nisi of costs in favour of the N

plaintiff with a certificate for two counsel.

O O

P P

Q Q

R (Doreen Le Pichon) R
Deputy Judge of the Court of First Instance
S High Court S

T T

U U

V V
- 24 -
A A

Ms Linda Chan SC & Mr Vincent Chen, instructed by Leon Lai & Co,
B B
for the plaintiff and the intervener
C Mr Charles Manzoni SC & Mr Norman Nip, instructed by C

Stephenson Harwood, for the defendant

D D

E E

F F

G G

H H

I I

J J

K K

L L

M M

N N

O O

P P

Q Q

R R

S S

T T

U U

V V