FACV No. 3 of 1997
IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
FINAL APPEAL NO. 3 OF 1997 (CIVIL)
(ON APPEAL FROM CACV No. 252 OF 1996)
|NG YAT CHI
|MAX SHARE LIMITED
CHINA RESOURCES (HOLDINGS) COMPANY LIMITED
Court : Chief Justice Li, Mr Justice Bokhary PJ, Mr Justice Nazareth NPJ, Mr Justice Mortimer NPJ and Lord Hoffmann NPJ
Date of hearing: 13 May 1998
Date of judgment: 18 May 1998
J U D G M E N T
Chief Justice Li:
1. The question in this appeal is whether a bankrupt registered shareholder, who holds fully paid shares in trust for another, loses the right to petition for winding up and relief under section 168A of the Companies Ordinance if his trustee in bankruptcy disclaims the shares.
The respondent Mr Ng Yat Chi ("Mr Ng") is an undischarged bankrupt. He is the registered holder of 98,000 shares of $1 each in the 1st appellant Max Share Limited ("the Company"), a private company. His holding originally represented 49% of its issued share capital. The majority shareholder is China Resources (Holdings) Company Limited ("China Resources").
2. On 9 April 1992, Mr Choy Bing Wing ("Mr Choy") obtained a charging order absolute over the shares. It was to secure a sum due from Mr Ng under an order for costs in Mr Choy's favour. On 13 August 1992, the shares were sold by public auction pursuant to a court order. Mr Choy bought them.
3. By this time, a receiving order had been made on 29 July 1992 against Mr Ng and the Official Receiver was constituted receiver. On 28 August 1992, Mr Ng was adjudged bankrupt and the Official Receiver became his trustee. The act of bankruptcy had been committed on 17 June 1992 when Mr Ng failed to comply with a bankruptcy notice served by another creditor who then petitioned for his bankruptcy. This was well after the charging order absolute in Mr Choy's favour. (The Court of Appeal was wrong to say that the charge in favour of Mr Choy was subsequent to the act of bankruptcy.)
4. During the time when Mr Choy was enforcing the charging order, the majority shareholder was consolidating its control of the Company. In May 1992, a resolution for a substantial increase in capital was passed and a substantial number of shares was allotted to the majority shareholder. Mr Ng's interest was reduced from 49% to less than 1%.
5. Following the public auction on 13 August 1992, the Official Receiver executed transfer documents and delivered them to Mr Choy on 21 August 1992. It is not disputed that Mr Ng thereafter held the shares in trust for Mr Choy absolutely. As already mentioned, Mr Ng was adjudicated bankrupt on 28 August 1992.
6. Following receipt of the transfer documents, Mr Choy applied to the Company for registration. The directors exercised their discretion under the articles of association to refuse. (Subsequently, Mr Choy attempted unsuccessfully to challenge the refusal in legal proceedings.) Mr Choy then persuaded the Official Receiver to apply for registration. But the Official Receiver's application to be registered in place of Mr Ng was also refused.
7. Mr Choy pressed the Official Receiver to do more to protect his interest. But the Official Receiver did not want to be involved further. On 28 January 1993, he wrote to Mr Choy's solicitors stating:
"I do not consider that I am the legal owner of the shares. I hereby disclaim any interest that I may have in them in accordance with Section 59 of the Bankruptcy Ordinance."
Section 59 of the Bankruptcy Ordinance
The material part provides:
"(1) Where any part of the property of the bankrupt consists of land of any tenure burdened with onerous covenants, of shares or stock in companies, of unprofitable contracts, or of any other property that is unsaleable, or not readily saleable, by reason of its binding the possessor thereof to the performance of any onerous act or to the payment of any sum of money, the trustee, notwithstanding that he has endeavoured to sell or has taken possession of the property or exercised any act of ownership in relation thereto, but subject to the provisions of this section, may, by writing signed by him, at any time within 12 months after the first appointment of a trustee or such extended period as may be allowed by the court, disclaim the property: ...
(2) The disclaimer shall operate to determine, as from the date of disclaimer, the rights, interests and liabilities of the bankrupt and his property in or in respect of the property disclaimed, and shall also discharge the trustee from all personal liability in respect of the property disclaimed as from the date when the property vested in him, but shall not, except so far as is necessary for the purpose of releasing the bankrupt and his property and the trustee from liability, affect the rights or liabilities of any other person."
On 10 June 1996, Mr Ng and Mr Choy petitioned against the Company and China Resources for winding up and for an order under section 168A of the Companies Ordinance that his shares be purchased at a fair value. Various complaints are relied on, including the dilution of his shareholding. These allegations have yet to be tried and the proceedings have not proceeded beyond the Petition. This is because the Company and China Resources then applied to strike it out on the ground that neither Mr Ng nor Mr...