YEUNG SING TUNG AND OTHERS v. NARITA PROPERTY MANAGEMENT LTD

HCMP 2556/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2556 OF 2007

____________

BETWEEN

YU SUN SAY 1st Applicant
YU WAH YUNG 2nd Applicant
YEUNG SING TUNG 3rd Applicant
CHAN KAM SHING 4th Applicant
YU JUDITH 5th Applicant
and
HKI PROPERTIES LIMITED
(formerly known as FULL SMART CORPORATION LIMITED)
Respondent

____________

AND

HCMP 2557/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2557 OF 2007

____________

BETWEEN

YU SUN SAY 1st Applicant
YU WAH YUNG 2nd Applicant
YEUNG SING TUNG 3rd Applicant
CHAN KAM SHING 4th Applicant
and
HKI DEVELOPMENT LIMITED Respondent

____________

AND

HCMP 2558/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2558 OF 2007

____________

BETWEEN

YU SUN SAY 1st Applicant
YU WAH YUNG 2nd Applicant
and
SUCCESSFUL DEVELOPMENT LIMITED Respondent

____________

AND

HCMP 2559/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2559 OF 2007

____________

BETWEEN

YU WAH YUNG 1st Applicant
YEUNG SING TUNG 2nd Applicant
and
NEW EXPRESS INTERNATIONAL LIMITED Respondent

____________

AND

HCMP 2560/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2560 OF 2007

____________

BETWEEN

YU SUN SAY 1st Applicant
YEUNG SING TUNG 2nd Applicant
YU WAH YUNG 3rd Applicant
LIU CHI JEN 4th Applicant
LIU WAI YIN 5th Applicant
and
WORLDWIDE DEVELOPMENT INVESTMENT LIMITED Respondent

____________

AND

HCMP 2561/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2561 OF 2007

____________

BETWEEN

YU SUN SAY 1st Applicant
YEUNG SING TUNG 2nd Applicant
YU WAH YUNG 3rd Applicant
and
EXCELLENT INTERNATIONAL INVESTMENT ENTERPRISE LIMITED Respondent

____________

AND

HCMP 2563/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2563 OF 2007

____________

BETWEEN

YU SUN SAY 1st Applicant
YEUNG SING TUNG 2nd Applicant
WANG YA NAN 3rd Applicant
TSOI KWING MING 4th Applicant
and
CHINA INTERNATIONAL FASHION PARK LIMITED Respondent

____________

AND

HCMP 2565/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2565 OF 2007

____________

BETWEEN

YEUNG SING TUNG 1st Applicant
YU WAH YUNG 2nd Applicant
CHAU CHI KEUNG 3rd Applicant
and
NARITA PROPERTY MANAGEMENT LIMITED
(formerly known as ABBA LIMITED)
Respondent

____________

AND

HCMP 2566/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2566 OF 2007

____________

BETWEEN

YU SUN SAY 1st Applicant
YEUNG SING TUNG 2nd Applicant
YU WAH YUNG 3rd Applicant
and
HKI (CHONGQING) LIMITED
(formerly known as JOY PEACE LIMITED)
Respondent

____________

AND

HCMP 2567/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2567 OF 2007

____________

BETWEEN

YU SUN SAY 1st Applicant
YEUNG SING TUNG 2nd Applicant
YU WAH YUNG 3rd Applicant
and
HKI (QINGDAO) LIMITED
(formerly known as SINO LOYAL LIMITED)
Respondent

____________

AND

HCMP 2568/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2568 OF 2007

____________

BETWEEN

CHAN KAM SHING 1st Applicant
JULIANA YU 2nd Applicant
and
MERIDIAN FINANCE COMPANY LIMITED Respondent

____________

Before: Deputy High Court Judge J. Harris, S.C. in Chambers

Date of Hearing: 18 January 2008

Date of Decision: 18 January 2008

Date of Reasons for Decision: 29 January 2008

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REASONS FOR DECISION

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1. I have before me 11 originating summons seeking extensions of time pursuant to section 122(1) of the Companies Ordinance, Cap. 32, for laying the relevant company’s income and expenditure statement before the company in general meeting. Each applicationhas been issued by the directors of the company in question.

2. With the exception of Meridian Finance Company Limited (Meridian), the companies are members of a group held directly or indirectlyby HKI Properties Limited. Meridian has common beneficial ownership with the other companies and their businesses are closely related.

3. The explanation for the failure to put audited income and expenditure statements before the companies in general meeting is thesame in each case. All the companies carry on business in China and do not pay income tax in Hong Kong. As a consequence they havenot been required by the Inland Revenue Department to file audited accounts with it. The directors explain in their affirmationsin support of each application that they understood that it was not necessary to produce audited accounts if they were not requiredby the Inland Revenue Department to do so unless a company had shareholders who were not represented on a company’s board of directorsand would not, therefore, be aware of a company’s financial position. In the case of each company there has, with the exceptionof H.K.I. Development Limited for a period of 2 years in 2006 and 2007, always been a representative of each shareholder on eachboard of directors.

4. In July 2007 HKI Properties Limited recruited a new financial controller, Tang Chi Fai, for the group of companies of which it isthe parent. Mr. Tang told the directors of the companies that they should have put audited accounts before the company in annualgeneral meeting. It was this that led to the present applications to regularize the position.

5. The periods in which the companies have failed to put audited accounts before the company in annual general meeting vary. In 7 casesthe periods are short as the companies were only incorporated in 2006 and 2007. In the other 4 cases the periods are longer. In onecase the failure goes back to 1999.

6. Section 221(1B)(a) is in the following terms:

“(1B) The court, if for any reason it thinks fits to do so, may in the case of any company and with respect to any year –

(a) substitute for the requirement of subsection (1) to lay a profit and loss account or (as the case may be) an income and expenditureaccount before the company at its annual general a requirement to lay such account before the company at such other general meetingof the company as the court may specify;”

7. The court has a discretion to grant extensions of time for the laying of profit and loss accounts or income and expenditure statementsbefore a company’s general meeting “for any reason it thinks fit”: Re Chiyu Banking Corporation Limited HCMP 2832/2002, 1 August 2002, per Kwan J. at §5.

8. The court has exercised such power to regularize non-compliance which has occurred continually for periods as long as 10 years:Re Artini International Company Limited & Others HCMP 2065, 2067, 2068, 2069, 2071, 2072/2007, 16 November 2007, per Kwan J. at §§9-12; Re Ta Yang Silicone Rubber Industrial Company Limited & Others HCMP 446-448/2007, 27 March 2007, per Kwan J. at §§6-14.

9. The above cases demonstrate that the type of factors to which the court has regard in considering whether to regularize non-compliancewith section 122(1) include:

(1) Whether the shareholders were aware of the financial position of the company in question and thus were not prejudiced by non-compliance;

(2) Whether the default was inadvertent; and

(3) Whether the court was satisfied that the company would comply with the obligation to lay its profit and loss accounts or incomeand expenditure statements before general meetings in future.

10. I am satisfied in the case of each of the companies which are the subject of the applications before me that the shareholders havenot been prejudiced, the default was inadvertent and that now the directors are alive to the companies’ obligations they will complywith them in the future.

11. One thing, which seems to me to me would complete the picture in a case such as the present is an explanation of the position inrespect of the companies obligations to file tax returns with the Inland Revenue Department. I would have expected there to havebeen some correspondence with the Inland Revenue Department and each company recording that the Inland Revenue Department did notrequire tax returns to be filed, and thus audited financial statements, to be filed. This would be consistent with the directors’evidence that they thought, albeit erroneously, that it was not necessary to have audited accounts prepared, because they were notrequired to file them with the Inland Revenue.

12. Despite the fact that such evidence is not before the court in the present case I will grant orders in the terms of each of thedrafts before me as I am satisfied that it is appropriate to do. I would, however, note for the benefit of practitioners that infuture applications in which the failure to comply with section 122(1) is explained on the grounds that it was not necessary to file audited accounts with the Inland Revenue Department and this misleadthe directors into thinking it was not necessary to produce audited financial statements at all, evidence should be adduced, if itis available showing that the Inland Revenue did not require tax returns to be filed.

(J. Harris, S.C.)
Deputy Judge of the Court of First Instance
High Court

Mr Anson M K Wong, instructed by Messrs Iu, Lai & Li, for the Applicants in all cases

Respondents act in person and absent in all cases