Re China Can Company (Hong Kong) Ltd

HCCW000024/1973

IN THE SUPREME COURT OF HONG KONG

COMPANIES (WINDING UP)

NO. 24 OF 1973

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Coram: Leonard J.

Date of Judgment: 2 April 1974

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JUDGMENT

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1. This was a petition for the winding-up by the Court of China Can Company (Hongkong) Limited (the Hongkong Company) presented by The Hongkong & Shanghai Bank Hongkong (Trustee) Ltd. the holder of 20,534 shares of $10 each in the capital of the company which shares were held by the petitioner as trustee of the will of CHOW Chung-liang deceased ("Mr. Chow") who died in 1957 the ground of the petition being that it is just and equitable that the Hongkong Company should be wound up. I should say straightaway that the only evidence before me consisted of affidavits sworn by or on behalf of the petitioner and other contributors and their exhibits and some agreed statements of facts. Although notices of intention to cross-examine certain of the deponents were given these notices were never proceeded with, no oral evidence was given and questions of the credibility or otherwise of the deponents did not fall for decision by me. In view however of the arguments advanced for and against the petition it was necessary for me to consider the facts relating not only to the carrying on of the business of the Hongkong Company but also the facts relating to its inception, its articles of association, its shareholders and in particular the vicissitudes of one of them Skylly Inc. N.V. ("Skylly") a company incorporated in Curacao under the laws of the Netherlands Antilles and the behaviour of the parties involved since 1966.

Its Inception

2. Some 20 years prior to the incorporation of the Hongkong Company that is, in or about the year 1933 there had been incorporated in China a company called the China Can Company Limited ("the China Company"). Apparently the moving spirit behind its incorporation was a Mr. SLANG Kiang-yuen ("K. Y. Shang") who died in 1968. The China Company established a branch in Hongkong in 1934, and Mr. Chow became a shareholder in the China Company in 1937. As appears from an agreement of the 3rd June 1952 between the China Company and the Hongkong Company, it had been resolved, on the 5th September 1948, at a Board meeting of the China Company, in order to avoid currency fluctuations and secure other advantages, that the branch should "basing on the value of its assets register itself as a Hongkong Limited Company" and be incorporated and "as soon as its incorporation was completed, shares should be issued to the stockholders of the [China Company] in proportion to their respective holdings." The Hongkong Company was incorporated on the 10th of April 1951 with a nominal capital of HK$500,000 divided into 50,000 shares of $10 each. Mr. Chow and Mr. Shang were subscribers to its Memorandum each taking 100 shares of $10 each. (On the 18th July 1951 300 further shares of $10 each were allotted 100 to a Mr. Long-man KO 100 to a Mr. John Wei Yang Yuenand 100 to Mr. LIANG Tze-yuen ("T.Y. Liang"). On the 29th August 1951 by special resolution the nominal capital of the Hongkong Company was increased to $2,000,000 making a total of 200,000 shares of $10 each shown in subsequent annual returns as fully paid up. Mr. Chow is on record as "Chairman of Directors" at the Extraordinary General Meeting of members at which this special resolution was passed. There was no evidence before me that any of the 500 shares issued in 1951 is now held by the petitioners or by any party appearing before me to resist the petition or that these shares were "earmarked" in any way. The agreement of the 3rd June 1952, having recited the resolution of the China Company on the 5th September 1948 and the handing over to the Hongkong Company of the Branch assets and its assumption of the Branch liabilities, went on to provide for the sale by the China Company to the Hongkong Company of all the Branch assets for HK$2 million to be satisfied by the payment of $5,000 in cash and by the allotment to the shareholders of the China Company "as appearing in the share register of the [China Company] on the 31st August 1951 of 199,500 shares of $10 each in the capital of the [Hongkong Company] credited as fully paid up in the proportion of one share in the [Hongkong Company] to 750 shares in the [China Company] to be allotted to and in the individual names of the said shareholders as and when the [Hongkong Company] requests the [China Company] so to do in writing". It further provided for its registration with the Hongkong Register of Companies. This agreement was signed on behalf of the China Company by K.Y. Shang and on behalf of the Hongkong Company by T.Y. Liang and John W.Y. Yang. On the 23rd July 1952 a further agreement was entered into between the Hongkong Company and the China Company to give effect to the agreement of the 3rd June 1952 whereby of the 199,500 shares remaining unallotted in the Hongkong Company 113,975 were to be allotted to named shareholders of the China Company listed in a schedule and 85,525 were to be allotted to the China Company in trust for others of its shareholders not mentioned in that schedule, who were not then in the Colony, until they should request the China Company to have them transferred to them. The 113,975 shares were so allotted, Mr. Chow receiving a substantial number (now held by the petitioner); of the 85,525 shares allotted to it as trustee the China Company still holds 53,200 shares. Presumably the other 32,325 shares have been transferred to other shareholders of the China Company who have since come to the Colony.

Shareholdings in November 1966

3. In the events that have happened, it is apparent it is apparent that on the 19th November 1966 the shareholdings in the Hongkong Company were divided roughly as follows :

4. The balance of the shares was held by other small shareholders whom it is unnecessary to mention. The holdings of Mr. Richard Chow and T.Y. Liang are mentioned because it is apparent that these two holdings include two of the five parcels each of 100 shares allotted for cash in 1951, to which I have already alluded. There was no evidence drawn to my attention as to who now holds the remaining three parcels of 100 shares each allotted for cash in 1951; none of these three parcels appear to have been held by the petitioner, Mr. Alexander C.S. Shang or Miss SHANG Tsien-zah.

The Articles of Association

5. I must now turn to a brief consideration of the Articles of Association.

6. The following are relevant to the "web of circumstances" requiring my consideration :

7. Share Transfers

8. General Meetings

9. By Article 64 Mr. Chow became the first Chairman of Directors of the Board.

10. By Article 66 Mr. Chow and Mr. K.Y. Shang became the first Managing Directors of the Company.

11. Directorate

12. By Article 69 Mr. Chow, Mr. K.Y. Shang, T.Y. Liang, Long-man KO and John Wei Yang Yuen became the first directors.

13. Articles 113, 114 and 115 deal with the presentation of accounts as follows :

14. It will be seen from the articles restricting share transfer and providing for general meetings how easily troubles could arise and how difficult it would be to solve them constitutionally, Arise they did.

History of the Hongkong Company from 1952 to 1966

15. For a period of 2 years that is between 17th May 1952 when the Hongkong Company became a public company altered Article 7(a) and deleted Articles 7(b), 32 and 33 and 14th May 1954 when it restored then in the form set out above the Hongkong Company was free of its self-imposed shackles. There was no evidence before me as to why they were re-imposed. Neither is it clear who took Mr. Chow's place, as Chairman of the Board of Directors and Co-Managing Director with Mr. K.Y. Shang after Mr. Chow's death on the 22nd May 1957 (if anyone did) but it would appear probable that Mr. K.Y. Shang alone carried on as Managing Director, and as General Manager, until about 1966 when in the words of his son Alexander Chi-shi SHANG ("Alexander") in paragraph 18 of his affidavit sworn and filed herein on the 13th December 1966 he "became ill and incapable of managing his affairs." In paragraph 2 of this affidavit Alexander also swears "I was appointed the Assistant Manager of the said Company by the General Manager, Mr. SHANG Kiang-yuen, my late father, in May 1962, and in that capacity I assisted my late father in conducting the affairs of the (Hongkong) Company" [I would pause in my relation of the history of events to remark that up to the date of the winding-up order Alexander continued to engage himself "in conducting the affairs" of the Company notwithstanding the incapacity and subsequent death of K.Y. Shang. In a letter dated 18th December 1970 from his solicitors, Messrs. T.S. Tong & Co., it is somewhat ingenuously claimed that he did so "in his capacity as Assistant Manager exercising delegated authority from the General Manager his late father Mr. SHANG Kiang-yuen under the provisions of Article 94 of the Articles of Association"] In the year 1966 a Balance Sheet and Accounts of the Hongkong Company, properly certified and reported upon by the Hongkong Company's auditors for the year ended 31st December 1965, were submitted to its registered shareholders. Since that time no such accounts have been so submitted.

Skylly

16. In or about the summer of 1958 Skylly Inc. N.V. was incorporated in Curacao, Netherlands Antilles. Of the 200,000 shares in Skylly 198,000 were held in the name of K.Y. Shang and 500 shares each in the respective names of CHEN Lin-chou ("Mr. Chen"), KING Tsung-zung ("Mr. King"), Pei Tsyuee and Wong Tsinforn Charles ("Mr. Wong"). Shortly after the incorporation of Skylly K.Y. Shang transferred to Skylly 75,804 shares in the Hongkong Company. The Managing Directors of Skylly were K.Y. Shang and Mr. Wong. Mr. Wong remained a Managing Director during the illness and after the death of K.Y. Shang which occurred on the 23rd July 1968.

Alexander's Attitude During His Father's Illness

17. During the illness of K.Y. Shang, Alexander sought and apparently obtained counsel's opinion as to the validity of the agreements of the 3rd June 1952 and the 23rd July 1952 which I have mentioned above. I do not feel called upon, for reasons which I will explain in detail in other proceedings (M.P. 85/74), to arrive at any conclusion as to the validity of these agreements. I have not been asked by counsel for Alexander in these proceedings to do so nor could I do so on the evidence available to me. Their validity or invalidity depends on questions of fact as to which I have no evidence; the opinions of counsel exhibited to Alexander's affidavit, excellent though they may be, are, having regard to the manner in which they are before me, not evidence of these facts nor indeed of any fact except the fact that they were sought and obtained. That they were sought and obtained, coupled with the suggestion in Alexander's affidavit (for it can in law amount to no more than a suggestion) that the agreements are invalid, and contrasted both with his appearance in these proceedings under the mantle of the holder of 2,000 shares which owe their existence to the agreements he questions and with his duty as a possible executor of K.Y. Shang's will which I will mention hereafter, is however material. It tends not only to show his attitude since his father K.Y. Shang became "incapable of managing his affairs" and but also to suggest great powers of self-deception - to put it at its most charitable. For if the agreements (and share allocations made in consequence of them) were invalid admittedly the petitioners would have no locus standi in this petition but neither would Alexander. He relies on his holding of 2,000 shares to give him standing. Again, and more important from the point of view of Alexander's probity, the shares transferred by K.Y. Shang (whose executor Alexander purports to be) to Skylly (in which the estate of K.Y. Shang has the overwhelming interest) would be valueless and the damage to K.Y. Shang's estate incalculable. However, as I have pointed out the point that the allocations were invalid was not taken by Mr. Litton in these proceedings so I will say no more about it.

The Events of 1966 to 1967

18. There was no evidence before me as to the precise date in 1966 on which the Balance Sheet and Accounts of the Hongkong Company for the year ended 31st December 1965 were submitted to the shareholders but the Balance Sheet for that year indicated that the Hongkong Company had, standing in a deposit account the sum of $1,900,000, on current accounts the sum of $864,750, and "In Hand" the sum of $31,591, or $2,796,341 in all, which apparently had not been "earmarked" for any particular project. Although no Balance Sheet or Accounts had been submitted to the shareholders in 1967 for the year ending 31st December 1966, on the 18th July 1967 the solicitors for the petitioner wrote to the Directors of the Hongkong Company enclosing a requisition under Section 113 of The Companies Ordinance (Cap. 32) for an extraordinary general meeting signed on behalf of the petitioner and by a Mr. N. Croucher (the registered owner of 556 shares) pointing out that the Directors were obliged by the Companies Ordinance to convene the meeting requisitioned. The purpose of the proposed meeting was to consider a resolution that a dividend of $7.00 per share be declared and paid - a possibly not unnatural suggestion having regard to the reserves disclosed in the accounts for the year ending 31st December 1965. This requisition does not appear to have evoked any reaction. The attitude of Alexander (then apparently managing the affairs of the Hongkong Company as delegate of the incapacitated K.Y. Shang) to it appears from paragraphs 27 and 28 of his affidavit of 13th December 1973 in which he refers to it as evidence of acquiescence on the part of the petitioner and remarks that "all the petitioner appeared to be interested in were dividends".

Original Jurisdiction Action No. 188 of 1967

19. It is common case that at this time Alexander was in exclusive defacto management of the business of the Hongkong Company. A purported Annual General Meeting of the Hongkong Company was held on the 19th November 1966 and resumed on the 18th February 1967. I have no evidence as to how this meeting was summoned nor whether the petitioner had knowledge of or attended it. Some time, presumably in June of 1967 - since the Statement of Claim is dated 16th June 1967 - Alexander commenced an action against the Hongkong Company for declarations that the meeting, the business transacted at it and each and every resolution purportedly passed by the Hongkong Company at it were null void and of no effect. The Statement of Claim (Ex ACSS-8 to the affidavit of Alexander of the 13th December 1973) is illuminating and I consider it necessary to refer to it in considerable detail. In it Alexander claimed to be a member of the defendant - the Hongkong Company (presumably relying on his holding of 2,000 shares). He stated that at the meeting the usual business carried on at Annual General Meetings took place i.e. the passing of Accounts for the fiscal year 1965, (these were the Accounts I have earlier mentioned) approval of directors fees for that year, declaration of dividend (50 cts. per share) and bonus (50 cts. per share), re-election of auditors and election of Directors. He recited Article 48 (which, it will be remembered, provides that a quorum shall be two members holding by right or proxy over 50% of the issued capital and that no business shall be transacted at any general meeting unless the requisite quorum be present at commencement of business). He claimed that the issued capital was $2,000,000 divided into 200,000 shares of $10 each (not, it will be noted, $5,000 divided into 500 shares) and that at all material times the China Company held 53,200 shares and Skylly 75,804 shares. He further claimed that at the meeting Mr. Wong and a Mr. SHANG Wei-kwang ("W.K. Shang") purported to represent the China Company under a power of attorney that was void because the China Company had ceased to exist "by operation of the law of its residence" alternatively because the capacity of the China Company to operate as a corporation was suspended or dissolved by that law, alternatively because it was not sufficiently identified or identifiable and alternatively because it was trustee of the 53,200 shares and had no power to delegate its voting powers. He went on to claim that at the meeting Mr. Wong purported to represent Skylly without authority. The particulars of this claim alleged that Skylly was a company incorporated and resident in Curacao and that its address on the Register of Members of the Hongkong Company was not in Hongkong : referred to Article 63 (which stipulates that the power of non-resident members to vote at general meetings is exercisable by attorneys whose power of attorney has been deposited with the company with notice of the attorney's address in Hongkong); alleged that Mr. Wong had no such power of attorney and that the voting rights of Skylly were therefore not exercisable. By reason of these matters Alexander contended that there was at no time during the general meeting in question a quorum within the meaning of the Articles of Association of the Hongkong Company.

20. The Hongkong Company was the sole defendant to these proceedings. Neither Mr. Wong nor W.K. Shang nor Skylly was a party. There was no evidence before me that they sought to intervene, if indeed, it was open to them to do so. No defence was served by the Hongkong Company and on the 6th October 1967 on motion for judgment, at which counsel for the Hongkong Company was heard, the declarations sought were given. There is no direct evidence before me as to whence came the instructions upon which counsel for the Hongkong Company acted. It was however stated in a letter dated the 28th February 1969 from Alexander's solicitors to Mr. Wong (Ex ACCS-18 to Alexander's affidavit of 13th December 1973) that he was the person from whom the solicitors acting for the Hongkong Company were taking instructions, that he, Mr. Wong, had sworn an affidavit on 3rd October 1967 in which he claimed to be the Chairman of the Board of Directors and to be authorized to make an affidavit on its behalf and that at the meeting declared null and void he had put himself and his "own limited company Christiana Investment Company Limited forward" as Directors of the Hongkong Company and proposed that K.Y. Shang and a Mr. Long-man KO should also serve as Directors knowing full well that K.Y. Shang was extremely ill and that Mr. Long-man KO was in a coma! Before me Mr. Litton for Alexander stressed that these serious allegations had never been repudiated. In fairness to Mr. Wong, however, I must say that he was not before me and although he swore certain affidavits these did not deal with the meetings the subject matter of this action No. 188 of 1967.

The Aftermath of the Default Judgment in Action No. 188 of 1967

21. The effect of the judgment was apparently to leave Alexander, in almost undisputed charge of the Hongkong Company, although it is clear from subsequent correspondence that the petitioner was left entirely in the dark both as to the commencement of the action and its outcome until a much late date. The petitioner had in its possession the Balance Sheet and Accounts for the year ending 31st December 1965 but, it would seem, no knowledge that their adoption by the Annual General Meeting had been set aside.

22. On the 19th of December 1967 a Mr. CHOW Hsiao-yung ("Richard Chow"), holder of 100 shares in the Hongkong Company originally allotted for cash, wrote inter alia to Alexander whom he styled "Director of China Can Co. (HK) Ltd." (a capacity which, so far as I am aware, Alexander never claimed for himself) calling a directors meeting for the 26th December 1967 to discuss Mr. Wong's tender of resignation as a director and the holding of an Annual General Meeting. A meeting was held but the only persons present were Richard Chow, Alexander, and W.K. Shang. I do not see how this could have been regarded by those attending as a lawfully constituted meeting but the question was never convassed before me. The meeting purported to decline Mr. Wong's resignation as Chairman of Directors. As to the fixing of a date for the Annual General Meeting "It was resolved that a written opinion of a barrister be sought through the company's legal adviser first, then the matter be discussed again". Difficulties arising in the day to day running of the business because of the illness of K.Y. Shang were discussed and the following resolution was carried :

"That in order to facilitate the company to make payments during the period when the General Manager Mr. Shang cannot sign due to health, all cheques be signed by HSI Ching-chi, the Chief Accountant and Miss SHANG Tsien-zah ( 'Miss Shang' ) the Cashier together with any two of the Directors Mr. CHOW Hsian-yung, Mr. SHANG Chi-shi and Mr. SHANG Wei-kwang (all four jointly) and a letter to this effect be sent to all banks with which the company has current accounts".

Whatever this may have meant is immaterial for according to Alexander it was never acted upon. In paragraph 26 of his affidavit of 13th December 1973 Alexander states :

"Despite the resolution aforesaid, the said Richard Chow and W.K. Shang refused to sign the formal authorisations to enable the signatories to operate the accounts of the company in the said banks." (There were no less than six such accounts, each in a different bank) "This has naturally put the company in a difficult position but I, as Assistant Manager, (sic) have been able to keep the Company running and its turnover has increased year by year".

I trust I will be pardoned if I pause in my recital of the facts to remark that I am mystified as to how an "Assistant Manager" could run a factory and a business as "Assistant Manager" without using so far as he discloses, any bank account when six were formerly needed.

Events After the Death of K.Y. Shang

23. After the death of K.Y. Shang in July 1968 there does not appear to have been any immediate change in the position of the Hongkong Company, Alexander continued to run it as "Assistant Manager". Alexander with the assistant of his sister was as a direct result of the default judgment in Action No. 188 of 1967 in control and having regard to the shareholding of the company and its articles in a position to remain in control. He has remained in control ever since. The Annual General Meeting for 1966 having been declared null and void at his instance no further General Meeting had been held; there was no Board of Directors and no management lawfully authorized to carry on business of the Hongkong Company. There had been no regular appointment of auditors. The position of the shareholders was unenviable. Not only had they been denied a say in the running of their company, denied knowledge of their company's affairs, seen no Balance Sheets or Profit and Loss Accounts from their company but, since 1965, they had received not one penny piece by way of income from their investment. So far as I can determine from the papers before me no blame for the continuance of this state of affairs can be laid at the door of the petitioner or any member of the Chow family nor of the any of the small share-holders on any ground other than that of excessive patience. The situation derives from the default judgment, the pertinacity of Alexander, the holding of 53,200 shares in trust by the moribund China Company, the prolonged incapacity and subsequent death of K.Y. Shang, his vesting of 75,804 shares in Skylly and the history of that company after his death. It may perhaps be thought that the situation outlined in this paragraph of itself, in common-sense, calls aloud for winding-up but there is clear authority for the proposition that it is the entire web of circumstances that must be considered before a wind-up order is to be made. This web cannot be seen in its entirety without an examination of the history of Skylly.

The Estate of K.Y. Shang

24. Before I proceed to this examination I will deal briefly with the question of representation to estate of K.Y. Shang. This question is sub judice in other proceedings which I must not prejudge. Unhappily it is necessary for me to mention it to explain the history of Skylly and the participation in that history of the persons supporting one or other faction of the Shang family. K.Y. Shang appears to have failed to instil into all his children the virtue of family unity - a lack which, as we have seen, became apparent during his prolonged incapacity and continued after his death. He had at least four children W.K. Shang, R.Z. Shang, Alexander, and Miss Shang. It is alleged in Probate Action No. 1 of 1969 that he signed three purported testamentary documents; by the first and second (signed in 1964) he appointed as executors Mr. Wong, Mr. King, Mr. Chan, Mr. Yulin HSI and Paoli TSLANG now deceased; by the third Paoli TSLANG, W.K. Shang and Alexander. Each of these has been challenged in Probate Action No. 1 of 1969 the plaintiffs in which are Madam PO Swei-chuan and R.Z. Shang and the defendants Paoli TSIANG, W.K. Shang and Alexander. The re-amended Statement of Claim in the action (dated 9th June 1972) which has been exhibited in an affidavit of Mr. Payne filed on 1st April 1974 seeks a declaration of intestacy but Mr. Wong, Mr. King, Mr. Chan or Mr. Yulin HSI (if he still lives) have not been joined; whether this be through oversight or whether there is solid legal ground for their omission is immaterial to me; it is sifficient for me to record that such an action exists and was alive in 1972 and that Mr. W.K. Shang did not contest the invalidity of the three testamentary documents. No. one, so far as I am aware, has raised any form of representation to his estate, although there are, apparently, two other actions between members of the Shang family for intermeddling.

Skylly Since 1968

25. That said, I can turn to the history of Skylly since the death of K.Y. Shang. Mr. Wong, Mr. Tsyuee PEI and Mr. King were then Directors. Alexander says none of them held shares beneficially but that they were nominees of K.Y. Shang and that Mr. Wong was able "by virtue of his managing directorship of Skylly to assume control" of K.Y. Shang's assets. If this was so he undoubtedly continued in that control with the assistance of R.Z. Shang and W.K. Shang for on 20th August 1968 a Power of Attorney was granted by YAU Chie-yin (described as "widow and relict" of K.Y. Shang) and W.K. Shang to R.Z. Shang (with power of substitution) on the basis that K.Y. Shang had died intestate, to enable R.Z. Shang to obtain representation to the estate of the deceased in Curacao. Alexander states that R.Z. Shang went to Curacao as a consequence but history does not relate what occurred there. Mr. Wong was appointed as Managing Director of Skylly in June 1958 and has remained de facto Managing Director ever since. He has managed that company, filing Annual Accounts and Tax Returns (to the exclusion of Alexander) and instructing Peat Marwick, Mitchell & Co. to perform accounting functions in relation to Skylly as from the beginning of 1969 (See affidavits of Mr. Roe of 13th December 1973 and 19th March 1974 and of Mr. Wong of 12th December 1973 and 8th March 1973). In the latter part of 1968 and early 1969 Brutton & Co. solicitors consulted a lawyer named Rojer in Curacao on behalf of W.K. Shang and they received a cable from that lawyer on 21st January 1969 in the following terms :

"Skylly represented by barrister Henry Litton holding meeting January 24th 1969 to change management stop Please let Clients know and if possible also Wong Pei and Ting impower Rojer or substitute by cable to attend meeting to represent them."

This cable was the first intimation received by Brutton & Co. or W.K. Shang that any meeting of Skylly was to be held and Mr. Dennis of Brutton & Co. cabled Mr. Rojer in the following terms :

"Refyrtel twentyfirst Wong King and Pei astonished Litton should pretend represent Skylly stop Presumably he pretends represent Skylly Inc. N.V. which we assume impossible without authority either of that company's Board Directors or share-holders resolutions stop He certainly has no authority from Board and none from shareholders Wong King and Pei these persons being three of the five shareholders of company stop Fourth share-holder L.C. CHEN died nineteen sixtyfive and no grant representation to his estate issued in H.K. stop Fifth shareholder K.Y. Shang died nineteen sixtyeight and similarly no grant representation to his estate issued in H.K. stop Therefore at present no single person especially not Litton entitled represent Shang estate stop Furthermore we also represent two eldest sons K.Y. Shang deceased who object most strongly Litton represent K.Y. Shang's interest strongly suspect Litton attempting unilateral coup detat on behalf K.Y. Shang's third son Alex Shang or his mother CHANG Hwei-ching a concubine of deceased who have no authority whatever deal with or represent Shang estate stop Directors Wong King and Pei energetically protest holding of meeting without notice to them and also Litton's unauthorised pretensions to have any say whatever regarding company stop Behalf Wong King and Pei as Directors and shareholders and also behalf W.K. and R.Z. Shang as eldest sons of K.Y. Shang these persons directly interested his estate authorise you or substitute to attend meeting and represent them stop Also take all steps in court if necessary prevent Litton or his clients taking any measures concerning Skylly stop Cable further developments and fresh information Brutton."

Mr. Rojer's partner Mr. Hage replied as follows on 25th January 1969 :

"At meeting authority Litton opposed according to instructions stop Under protest voted against Litton stop Herewith (sic) status quo maintained till legal judgment stop Letter follows Hage."

That W.K. Shang was taken completely by surprise by Alexander's move whereby Mr. Litton was instructed to go to Curacao and hold the meeting in question is deposed to by W.K. Shang in his affidavit of 2nd March 1974 and supported by Mr. Payne's affidavit of the 15th March 1974. I feel I should say that Mr. Litton Q.C. is well known to me personally as a most respected member of the Hongkong Bar and I find it impossible to believe that he would consciously stoop to any action that might result in his client obtaining by surprise a tactical advantage unfair to his opponent. My remarks on the subject of this meeting must therefore not be taken as a personal criticism of Mr. Litton. He had his instructions and, of course, we do not know what they may have been. Again in considering what occurred in Curacao one must remember that we are dealing with a system of law and procedure that may differ from ours. Perhaps with the advantage of hindsight I consider that I must regard Alexander's action in arranging for this meeting without any forewarning to others interested in the estate of his late father, in particular to W.K. Shang, as dishonourable. He must have intended by it to gain the voting rights of Skylly in the Hongkong Company so that he might be in a position to control a general meeting. That Mr. Wong continued unmolested to run the day to day affairs of Skylly indicates a remarkable indifference on Alexander's part (if he believed his own criticisms of Mr. Wong) to the care of the assets of that company apart from its interest in the Hongkong Company.

26. A letter from Messrs. T.S. Tong & Co. solicitors for Alexander to Brutton & Co. of 29th January 1969 goes some distance to explain the instructions received by Mr. Litton prior to his departure for Curacao. It reads as follows :

Brutton & Co. were suprisingly charitable to Messrs. T.S. Tong & Co. in their reply in that they appear to place no blame at their door and express no surprise at their behaviour. I should have thought the very least Messrs. T.S. Tong & Co. might have done, as honourable solicitors, would have been to write to Messrs. Brutton & Co. before Mr. Litton left for Curacao not five days after the meeting for which he went! It must however be noted that their instructions apparently were that the "bulk of the deceased's estate was located in Curacao". Their use of this expression suggests that they had instructions that K.Y. Shang's or (more properly Skylly's) interests were wider than the shares in the Hongkong Company and that it was these wider interests that Alexander was concerned to preserve. If it was, it is surprising that, notwithstanding Alexander's later contention that he was by reason of the meeting of the 24th January 1969 Managing Director of Skylly, he left Mr. Wong "in the chair" and these wider interests at the mercy of Mr. Wong whom he says he distrusted but in whom K.Y. Shang had clearly reposed absolute confidence.

27. The relevant portions of Messrs. Brutton's reply are as follows :

The Result of the Meeting of Skylly on 24th January 1969

28. The question as to whether Alexander by this meeting acquired the right, as Managing Director of Skylly to use the voting rights of the shares held by Skylly in the Hongkong Company was in dispute from the outset of the proceedings before me. I will discuss my ruling on the question to which it gave rise when I have finished what is, I fear, already an overlengthy recital of facts. The issue is one of fact but involved in it is a question as to the law of Curacao, also of course, a question of fact. I did not decide it at the outset of the proceedings and do not decide it now, notwithstanding a dramatic development on the final day of the hearing, for I do not think it essential to do so. The facts relating to the issue are as follows :

29. Firstly there was abundant evidence that in Curacao Mr. Wong was the de facto Managing Director.

30. Secondly there was before me sworn evidence in the form of a joint affidavit from Johannes Hage, Elmer Leslie Joubert and M.C.A. Rojer sworn on the 21st December 1973 and but not filed herein until the 14th March 1974 from which it appeared that those gentlemen two at least of whom gave details of professional legal qualifications were of the opinion that "The purported discharge of Tsinforn C. Wong from his office of Managing Director was null void and of no effect" that "the purported appointments as Managing Directors of Alexandra (sic) Chi Shi and Chi Tsien Zah (sic) were null void and of no effect" and that Mr. Wong "was the only person entitled to manage and to carry on the business and affairs of Skylly".

31. I mean no disrespect to the probity or professional integrity of these learned gentlemen when I mention that two at least of them, Mr. Hage and Mr. Rojer, had themselves acted in the matter and accepted instructions from Messrs. Brutton & Co. in 1969. I prefer expert evidence particularly on matters of foreign law to come from an entirely independent source.

32. Thirdly I had before me as exhibit ACSS-20 to the affidavit of Alexander of the 13th December 1973 an opinion from a Dr. Smeets. This is not sworn but appears from the almost illegible copy supplied to me to have been notarily certified. Dr. Smeets does not go so far as to say that by the law of Curacao Alexander had become the Managing Director of Skylly but that is implicit in his opinion. Strictly speaking it is not evidence but coupled with Alexander's claim and the fact that he and his sister had instructed Messrs. T.S. Tong & Co. as Co-Managing Directors of Skylly to enter an appearance in the winding-up proceedings on behalf of Skylly it casts doubt on the validity of the claims of W.K. Shang or Mr. Wong to instruct solicitors to enter an appearance on behalf of Skylly.

33. Fourthly on the 29th March 1974 there was filed an affidavit sworn by Alexander dealing with proceedings in Curacao as at that date. It appears from this affidavit that after the commencement of the hearing of this petition having regard to the existence of the issue, Alexander was (personally and not through T.S. Tong & Co. I am glad to note) in communication with his legal advisers in Curacao. He goes on to say :

"as a result of their advice, proceedings have been commenced in the Court of Curacao, being the action with the following title, namely :

34. As I understand it this action was commenced after I started the hearing of the petition (which I had adjourned with a view to possible settlement). From its title it would appear that Mr. Wong's Skylly (if I may use the phrase) was originally unaware of it. It had to intervene. It appears from an affidavit sworn and filed by Mr. Payne solicitor for W.K. Shang and Mr. Wong on the 1st April 1974 that this was indeed so. He states :

"neither my firm nor W.K. Shang nor Tsinforn Wong was ever informed in advance ... that attorneys had been instructed to commence proceedings in Willemstad purportedly on behalf of Skylly".

Mr. Payne then exhibits a telex his firm renewed from his agents in Curacao which reads :

"Payne we are very happy to inform you that petition from plaintiff Skylly (Alex Shang) has been denied by Judge which means that defendant Nederlandse Handelmaatschappij Trustkantoor Curacao does not have to give the profit tax returns to Skylly read Alex Shang stop The Judge will only give us the decision in writing in the middle of next week whereafter we shall translate same in the English language and telex contents to you stop The Judge, amongst other things, stated that Dr. Hage's power of attorney at the meeting held in Curacao on January 24 1969 was legally in order and that Henry Litton representing Alex Shang had no more right than Dr. Hage representing YAO Chia-yin and SHANG Wai-kiang yuen and executor stop Plaintiff Skylly has the right to appeal within 14 days stop In case they appeal defendant Nederlandse Handelmastschappij Trustkantoor Curacao must also appear before the High Court and we have offered to represent them free of charge in order to be in a position to fully protect the interest of your client stop Your co-operation in this matter has greatly helped to obtain this favourable decision stop Congratulations regards Rojer."

From this he believes that a judge of first instance in Curacao has decided each executor of the purported last will of K.Y. Shang was equally represented at the meeting of the 24th January 1969 and that therefore Mr. Wong remains as Managing Director of Skylly. That may well be so but it is to be observed that the decision is at first instance and while it may well be that the holder of 75,000 shares now supports the petition I do not decide the petition on that ground - there may well be, as Mr. Wright foresaw, an endless vista of litigation in Curacao. The Skylly episode is but one part of the "web of circumstances". It is a part I have found difficult to unravel. Once exposed it appears to me to reflect discreditably on Alexander and to illustrate clearly the lengths to which he is prepared to go to obtain an advantage over, inter alios, his own brothers and to maintain his position as "Assistant Manager" of the Hongkong Company.

Events in Hong Kong After the Skylly Meeting of 24th January 1969

35. There was no immediate action taken as a result of this meeting in Hong Kong. Alexander continued in sole management of the Hongkong Company. Probate Action No. 1 of 1969 was however commenced.

36. In the late autumn and winter of 1968 the solicitors for W.K. Shang had been in correspondence with the petitioner and the petitioner's solicitors with winding-up proceedings in mind and on the 8th February 1969 Messrs. Yung, Yu, Yuen & Co. for W.K. Shang informed Messrs. Philip Remedios & Co. that their client had resolved to petition for the winding-up of the company. Nothing appears to have come from this suggestion.

Correspondence Between Solicitors after 7th November 1970

37. It was not until the 7th November 1970 that the petitioner wrote to the Director and/or Secretary of the China Can Company H.K. Ltd. This letter contained the following complaints : a complaint that there had been no accounts since those for the year 31st December 1965; a complaint that they had not been notified as to why no dividends had been paid since September 1965; no Annual General Meetings had been convened or held since 1965; that there had been no Directors' reports since that year; it requested an explanation and information as to the affairs of the company referred to Articles 113 to 115 and in particular requested :

On the 18th December 1970 Messrs. T.S. Tong & Co. replied to this letter on behalf of Alexander the "Assistant Manager". By this letter the petitioner was, for the first time apparently, acquainted with the judgment of the 6th October 1967 in Action No. 188 of 1967. The letter went on to state that Messrs. Ford, Kwan & Co. had been the solicitors for the company in that action and had taken instructions from Mr. Wong and that in an affidavit of the 3rd October 1967 Mr. Wong had stated that he was the Chairman of the Board of Directors, that since the judgment there had been no Board of Directors and "Our client ... had been, in his capacity as Assistant Manager, exercising delegated authority from the General Manager, his late father" (K.Y. Shang). The letter went on :

Bearing in mind the admitted fact that Alexander had been in sole charge of the company during his father's illness in 1966 and had so continued up to the date of this letter it was to say the least of it uncandid. The petitioner was as much in the dark as to the affairs of the Hongkong Company after he received it as it had been before. Most important the accounts were not forthcoming. There followed a protracted and inexplicable delay on the part of the petitioners. They formally acknowledged Messrs. T.S. Tong & Co.'s letter on the 21st December 1970. Three and a half months later on the 6th April 1971 Messrs. T.S. Tong & Co. sent them a reminder. On the 7th April, 1971 the petitioner wrote:

"we still await a reply from our solicitors but we will contact you in the matter as soon as we can. In the meantime if your client's views have changed in any way or if he has any further suggestions to make concerning the unfortunate position regarding the above company please immediately let us know."

This last sentence was odd because there had been no communication between the parties either over the telephone or otherwise until after the 7th April 1971. There were telephone conversations on some day between the 7th April 1971 and the 13th April 1971. This was agreed between the parties. On the 29th of May 1971 Messrs. T. S. Tong & Co. wrote again to the petitioners informing them that Mr. Richard Chow who was the holder of 10,270 shares in the company was unco-operative but stating that with the petitioners' co-operation the matter could still be resolved. Not until the 10th of July 1971 did the petitioners' reply to this letter stating that Mr. Minns who was dealing with the matter was on leave and that they were awaiting advice from their solicitors. The matter remained in abeyance until the 13th September 1972. During this period Alexander continued in charge of the company accounting to no one. The petitioners must be held to blame to some extent for this. They were sleeping on their rights. One of the matters which I had to consider as a result was whether this affected the question as to whether it was just and equitable to wind-up the company. I will deal with this later. On the 13th September 1972 Messrs. Philip Remedios wrote to Messrs. T.S. Tong & Co. referring to the letter of the 18th December 1970 "and subsequent telephone conversations" in the course of which they had enquired what Alexander proposed to do with regard to dividends, election of directors and the general policy of the company if the petitioners co-operated in forming a quorum. Alexander was not prepared to commit himself to any special course of action. [The danger to the petitioners and other members of the Chow family must have been obvious since if Alexander was in truth the holder of 75,000 shares of Skylly he could dominate any such meeting.] The letter of the 13th September 1972 goes on to state :

This letter was ignored by Messrs. T.S. Tong & Co. and a reminder was sent on the 26th September 1972; Alexander continued in sole charge of the company's affairs accounting to no one. He had said that accounts had been prepared. They may have been but they were never produced by Alexander. Even when he filed his affidavit opposing the winding-up he did not see fit to produce them. Even during the winding-up proceedings he did not produce them. Although the petitioners had asked for accounts in their letter of the 18th December 1970 Messrs. T.S. Tong & Co. blandly said :

"As regards the accounts of the company these have been audited from year to year by Messrs. Peat Marwick, Mitchell & Company but, as there has been no Board of Directors since the Judgment in O.J. Action No. 188 of 1967 the Balance Sheet has not been signed in the manner required in Section 128(1) of the Companies Ordinance."

Messrs. T.S. Tong & Co. knew that their client had been in sole charge of the company with the assistance of his sister, Miss Shang, as cashier. They knew or must be taken to have known that the excuse of delegated authority from the deceased K.Y. Shang was no justification for his continuing in authority. When eventually accounts were produced they were produced not by Alexander but by his sister Miss Shang who described herself as the cashier of the company and who said she was producing them with the consent of Alexander. They were not produced until the 19th March 1974 and when produced they bore no report from the auditors and gave no indication of the information upon which the auditors had drawn them up. When arguing the case before me Mr. Litton suggested that there were six time-slots under which the facts could be grouped. The first of these was a period from 1952 to the 23rd of July 1968 (the date of the death of K.Y. Shang). The second was the period from the 6th October 1967 (the date of the default judgment in O.J. Action No. 188 of 1967) to the 24th of January 1969 (the date of the meeting of Skylly in Curacao). The third was from the 24th January 1969 to the 18th December 1970 (the date of Messrs. T.S. Tong & Co.'s letter proposing co-operation with the petitioners). The fourth was the period from the 18th December 1970 to the 13th September 1972 (the date of the letter asking for accounts from Messrs. Philip Remedios to Messrs. T.S. Tong & Co.). The fifth was from the 31st August 1973 (the date of the presentation of the petition) to the 10th September 1973 when Messrs. T.S. Tong & Co. wrote a letter with which I will deal later. Mr. Litton was silent as to what occurred between the 13th September 1972 when the petitioners requested accounts and the date of the presentation of the petition some ten months later. This is scarcely surprising since during this period his client was also silent and had not produced any accounts.

38. I have now dealt with the facts as at the date of the presentation of the petition and also with the facts relating to Skylly as they were up to the date of my decision to order winding-up.

Matters Arising During the Hearing of the Petition

39. The petition was issued and presented on the 31st of July 1973. It was then fixed to be heard on the 21st September 1973, before Mr. Justice Li. It was not heard on that date and it came before me for the first time on the 10th December 1973. The following parties had given notice of intention to appear :

On the 6th December 1973 Skylly instructing Messrs. Brutton & Co. made application for special leave under the provisions of Rule 30 of the Companies (Winding-up) Rules to appear on the hearing of the petition. This application was supported by an affidavit by Mr. Wong stating that he was the Managing Director of Skylly. On the 13th December Alexander claiming to be an executor of the estate of K.Y. Shang (holding 3,685 shares) gave notice of intention to appear on the adjourned hearing on the 13th December 1973 and to oppose the petition. This notice was dated the 13th December 1973.

40. When the matter first came before me on the 10th December 1973 the following appeared :

Thereupon Mr. Litton pointed out that the notices of intention to appear by them on behalf of W.K. Shang and R.Z. Shang were not in accordance with Form 10 of the Winding-up Forms. I was told that application had been made for special leave under Rule 30 in respect of both to Mr. Justice Li and special leave had been granted. Mr. Jackson-Lipkin contended that the right to appear once notice had been given was absolute while he might not be entitled to costs if he did not state whether he intended to support or oppose the petition. Mr. Litton then applied for an adjournment of the hearing until the 13th December. I was informed that members of the Chow family and Mr. Litton's clients were in active negotiation in relation to their holdings for some time that they had reached the stage where it was envisaged that detailed agreements would have been signed that morning between 7.30 a.m. and 9.45 a.m. Mr. Litton informed me that all that was sought was time to dot the "i"s and cross the "t"s so that the matter could finally be disposed of, probably by withdrawal of the petition. Mr. Jackson-Lipkin supported the application and asked me also to adjourn his application for right tobe heard on behalf of Skylly. Mr. Wright did not oppose the application and I adjourned until Thursday, the 13th December. On the 13th I was faced with a series of requests for adjournment. I granted an adjournment until 2.30 p.m. At 2.30 p.m. I was asked for an adjournment until the following morning; this I granted. The following morning Mr. Litton informed me that despite exertion the parties had not been able to finalize an agreement and asked for an adjournment until 2.30 p.m. At 2.30 p.m. Mr. Wright informed me that he was confident that agreement had been reached that a substantial cash deposit was being made and he was confident that the necessary documents would be executed. This he said would put him into a position to withdraw the petition at 9.30 a.m. on Monday, 17th of December. My optimistic note reads :

"Adjourned to 9.30 a.m. 17th December 1973 for formal orders".

On 17th December I was again told that the matter was within a hair's breadth of settlement. Mr. Wright however requested me to fix a date beyond which the petition must proceed if the parties were not agreed and the case was adjourned to the 15th January 1974. I was unfortunately not available on that date and the case was adjourned peremptorily to 25th March 1974.

41. On that morning there were in my list Miscellaneous Proceedings No. 85 of 1974(which were commenced by Alexander and which sought, inter alia, a declaration that the shares vested in the petitioner had not been properly allotted and a rectification of the Register of the Hongkong Company) and Miscellaneous Proceedings No. 95 of 1974 (which sought determination of the Skylly issue). The petition had been fixed for 10.00 a.m. and an application in chambers to strike out the application in Miscellaneous Proceedings No. 85 of 1974 had been fixed for 9.30 a.m. Miscellaneous Proceedings No. 85 of 1974 were after more than one days argument struck out as an abuse of the process of the court without prejudice to the initiation by the applicant of proceedings by way of action if so advised.

42. I did not hear Miscellaneous Proceedings No. 95 of 1974 in which an application was made by Mr. Wong to have the question of the control of Skylly decided but ruled that the parties in the petition must be called on and not the parties in Miscellaneous Proceedings No. 95 of 1974.

43. Mr. Wright thereupon submitted to me as that the dispute between the parties as to the control of the shareholding in the Hongkong Company by Skylly should not be allowed to side-track the court in dealing with the petition for winding-up; that the merits of the petition were one thing and the merits of the domestic dispute regarding the control of Skylly another; that I should hear both sides i.e. both claimants for Skylly and hear them on the merits of the petition and not on the merits of their dispute. Mr. Jackson-Lipkin supporting Mr. Wright said that if the course he suggested was followed he would ask for an adjournment of Miscellaneous Proceedings No. 95 of 1974 until the conclusion of the winding-up proceedings. He submitted that it was only if I was in grave doubt as to whether or not to make a winding-up order that I would have to determine who was Skylly in the winding-up proceedings. Mr. Litton opposed this course, saying that the appearance filed by Messrs. T.S. Tong & Co. for Skylly still stood; Mr. Jackson-Lipkin had made application to be heard under Rule 30 also on behalf of Skylly on the basis of instructions from Mr. Wong. He suggested that Mr. Jackson-Lipkin really sought to determine which faction was lawfully in control of Skylly and could not be heard on behalf of Skylly unless the appearance entered on behalf of that company by Messrs. T.S. Tong & Co. was invalid; not only was there a procedural point involved but also a substantive point which was vital to the issue in the winding-up.

My Ruling on the Skylly Question

44. I was, at that time, very far from satisfied that a determination of the question as to the right to vote the shares of Skylly Inc. was essential to my decision on the question of winding-up and therefore regarded the difficulty as one of procedure and procedure as the servant of the court rather than its master. The petition had already been adjourned several times. Section 184 of the Companies Ordinance makes the winding-up of a company deemed to commence at the time of the presentation of the petition. Section 182 makes any disposition of the property of a company including things in action and any transfers of shares or alteration of status of the members of a company made after the commencement of the winding-up void unless the court otherwise orders. Continued postponements of the hearing of a petition are therefore undesirable. Having taken all these matters into account I ruled that the hearing of the petition must continue without the immediate trial of the issue, and that I would hear both Mr. Jackson-Lipkin and Mr. Litton without deciding whether Alexander or Mr. Wong had control of Skylly. My ruling was made without prejudice to the position of either.

45. Mr. Jackson-Lipkin thereupon informed me that Mr. W.K. Shang gave notice of intention to support the petition. Thereupon Mr. Bernacchi and Mr. Goodbody (T.S. Tong & Co.) who had appeared for Alexander in M.P. 85 of 1974 applied to be heard on behalf of Miss Shang to oppose the petition. This application was not opposed by Mr. Wright and was granted by me.

46. I was then informed of the proceedings in the High Court of the Netherlands which I have mentioned earlier.

47. Mr. Wright in support of the petition contended that Section 177(f) of the Companies Ordinance conferred on the court a judicial discretion of the widest character, it was an independent and separate ground for winding-up not ejusdem generis with the preceding five grounds mentioned in Section 177. He placed heavy reliance on the case of Re Westbourne Galleries Ltd.⁽¹⁾ as indicating how wide is the discretion conferred on the court. This case established, he argued, that the court must take into account the whole web of fact and circumstances and if having done so it came to the conclusion that justice and equity necessitated it then the court acts under the Section 177(f). The following passages in the judgment of Lord Wilberforce were he suggested of particular interest in this case : firstly at page 374 :

"This power" (that which enables a winding-up order to be made if the court is of the opinion that it is just and equitable that the company should be wound up) "has existed in our company law in unaltered form since the first major Act, The Companies Act 1862. Indeed it antedates that statute since it existed in the Joint Stock Companies Winding-Up Act 1848. For some fifty years, following a pronouncement by Lord Cottonham L.C. [Ex Parte Spackman (1849) 1 Mac. & G. 170, 174] in 1849 the words 'just and equitable' were interpreted so as only to include matters ejusdem generis as the proceeding clauses of the section, but there is now ample authority for discarding this limitation. There are two other restrictive interpretations which I mention to reject. First, there has been a tendency to create categories or headings under which cases must be brought if the clause is to apply. This is wrong. Illustrations may be used, but general words should remain general and not be reduced to the sum of particular instances. Secondly, it has been suggested, and urged upon us, that (assuming the petitioner is a shareholder and not a creditor) the words must be confined to such circumstances as affect him in his capacity as shareholder. I see no warrant for this either."

Again at page 376 Lord Wilberforce says :

"In England, the leading authority is the Court of Appeal's decision in In re Yenidjc Tobacco Co. Ltd. [1916] 2 Ch. 426. This was a case of two equal director shareholders, with an arbitration provision in the articles, between whom a state of deadlock came into existence. It has often been argued, and was so in this House, that its authority is limited to true deadlock cases. I could, in any case, not be persuaded that the words 'just and equitable' need or can be confined to such situations. But Lord Cozens-Hardy M.R. clearly puts his judgment on wider grounds. Whether there is deadlock or not, he says, at page 432, the circumstances

He then deals with this case concluding that it should no longer be regarded as authority. Again at page 379 Lord Wilberforce says :

It is these, and analogous, factors which may bring into play the just and equitable clause, and they do so directly, through the force of the words themselves."

In the course of his judgment at page 384 Lord Cross of Chelsea had this to say :

"The 'just and equitable' clause is, as I see it, an equitable supplement to the common law of the company which is to be found in the memorandum and articles; but there are some reported decisions which I find difficult, if not impossible, to square with this view. The most notable of these is that of Simonds J. in In re Cuthbert Cooper & Sons Ltd. [1937] Ch. 392."

Lord Cross goes on to set out the facts of that case briefly and continues :

"One naturally hesitates to dissent from any decision of Lord Simonds; but I cannot help thinking that on this occasion he took too narrow a view. It is not right to say that in a partnership case the court is tied by the terms of the partnership articles, for it will decree a dissolution of a partnership for a fixed term if it is 'just and equitable' to do so .... It is to be observed that the judge himself said that he had found the case a difficult one and in In re Swaledale Cleaners Ltd. [1968] 1 W.L.R. 1710 Danckwerts L.J. expressed the view that it was wrongly decided. It is true that in the earlier case of Charles Forte Investments Ltd. v. Amanda [1964] Ch. 240 the Court of Appeal - of which Danckwerts L.J. and I myself were members - had accepted the Cuthbert Cooper decision as correct, but it was not in any way necessary for our decision in that case to approve it and I think that we were wrong to do so."

[I make no apology for these lengthy quotations from the Westbourne Galleries Ltd. case⁽¹⁾ as I found them of immense assistance.] Mr. Wright also placed heavy reliance on the case of Wondoflex⁽²⁾ of which Lord Wilberforce had said in In re Westbourne Galleries Ltd.⁽¹⁾ at page 378 :

"The whole judgment is of value."

Although Lord Wilberforce cautioned against the use of such expressions as : "quasi-partnerships" or "in substance partnerships" because a company however small, however domestic, is a company not a partnership or even a quasi-partnership and the members of it have accepted new obligations his expressions of approval for the Wondoflex case⁽²⁾ and the fact that Viscount Dilhorne and Lord Pearson agreed with all he had to say is sufficient warrant for regarding the Wondoflex case⁽²⁾ as most persuasive authority. The Wondoflex case⁽²⁾ was one in which the petitioner had lost confidence in the persons who controlled the company. The loss of confidence was caused by the fact that they had shown a lack of probity in the conduct of the company's affairs. Mr. Justice Smith held that it was open to the court in the absence of special circumstance to take the view that it was just and equitable to order a winding-up. Having quoted the words of Neville, J. in In re Bleriot Manufacturing Aircraft Company Limited⁽³⁾ at page 255 :

"the words 'just and equitable' are words of the widest significance, and do not limit the jurisdiction of the Court to any case. It is a question of fact, and each case must depend on its own circumstances."

He went on :

"This passage had been cited with approval by the Privy Council in Loch v. John Blackwood Limited [1924] A.C. 783. Moreover, the Judicial Committee there stated that a consideration of the justice and equity of pronouncing an order for winding-up ought to proceed upon 'a sound induction of all the facts of the case'; and when the question again came before the Privy Council in Davis & Co. Ltd. v. Brunswick (Australia) Ltd. [1936] 1 All E.R. 299 it was expressly held that no general rule can be laid down as to the nature of the circumstances which had to be borne in mind in considering whether it is just and equitable to order a winding-up .... The Section throws on the court the responsibility for determining as fresh circumstances and conditions arise, whether a given set of circumstances does render it just and equitable that the company should be put into liquidation."

He also quoted with approval what was said by Mann C.J. in In re Straw Products Pty. Ltd.⁽⁴⁾ at page 223 :

"Facts rendering it just and equitable that a company should be wound up cannot be resolved into categories. Cases upon this subject are to be read with this always in mind. They merely illustrate the diversity of the circumstances calling for an exercise of the Court's discretion in winding up a company because it is just and equitable to do so."

He went on to warn in the words of Lord Clyde in Baird v. Lees⁽⁵⁾ at page 90 :

"A discretion must however be judicially exercised. It is not enough for the Court in exercising it to have in the familiar phrase of a decree arbitral 'god and a good conscience' before its eyes; grounds must be given which can be examined and justified."

He went on to examine the principles of a general character which should guide the court in exercising its discretion. He outlined the principle that where the petitioner had lost confidence in the persons who controlled the company and the loss of confidence was caused and justified by the fact that they had shown a lack of probity in their conduct of the company's affairs. The court might properly take the view that it was just and equitable to order a winding-up. He regarded this rule as applying not only to case where the analogy of a partnership is applicable but to other cases also. He went on to point out that the rule that in the case of a private company which is in substance a partnership the court should apply the same principles as it would in a claim for dissolution of partnership could not apply unless the members of the company were a relatively small number who have become associated in pursuance of an arrangement involving the creation of a personal relationship. [I would remark that I do not consider that the Hongkong Company is in substance a partnership. It may have begun as one or stemmed from one when the China Company was set up but it had lost that character long before the presentation of the petition.] Smith, J. regarded it as a general rule that a valid exercise of powers conferred by the articles could not afford a ground for winding-up subject to the qualification that acts which are entirely outside what might be regarded as having been within the contemplation of parties when they became members might afford such a ground. Thus a winding-up night be ordered where deadlock occurred although neither side was acting in excess of power. Mr. Wright suggested four grounds on which it would be just and equitable to order the winding-up in this case. Firstly, the deadlock which had arisen because of the dispute as to the control of Skylly and because the 52,000 shares held by the China Can Company were frozen. This deadlock was compounded by the default judgment obtained by Alexander in 1967 and by Alexander's contention that he controls Skylly together with the possibility of a succession of appeals in Curacao and by the natural reluctance of his clients to act in concert with Alexander. Secondly, he relied on the lack of confidence whichhad arisen as a result of the assumption of control by Alexander and his refusal to produce accounts from the end of 1965 onwards. His third ground was the general equitable principles enshrined in the Westbourne Galleries Ltd. case⁽¹⁾. The fact that the holder of a mere 2,000 shares had managed to get himself into a position where he could and did control the business of the company without regard to the Ordinance or to Articles of Association was, he suggested, clearly sufficient to bring the case within these principles. Fourthly he suggested there was an urgent need for investigation into the conduct of Alexander from 1966 onwards an investigation which could not be carried out otherwise than in a winding-up. On this need for investigation he suggested that the petition should succeed on this ground alone, quoting In re Newman and Howard Ltd.⁽⁶⁾ where it had been decided that the rule that a petitioning contributory must prove the existence of assets which would give him a tangible interest in the winding-up could not apply where a petition was based on a failure to supply accounts. The accounts in our case had been eventually produced not by Alexander but by his sister Miss Shang. They were unsigned by the auditors and unreported upon and that the source on which they were based was not revealed. These accounts themselves showed the need for investigation. They showed that over the years bonuses had been paid but gave no indication as to whom they had been paid or who had authorised them. Most important they showed that "cash in hand" had grown from a relatively small sum to a sum of over $2,000,000. He did not know where this "cash in hand" now was nor who controlled it.

48. Mr. Jackson-Lipkin on behalf of W.K. Shang and on behalf of Skylly (in so far as he was entitled to speak on behalf of Skylly) enlarged on the question of lack of confidence. The lack of confidence would continue to exist for so long as Alexander continued in management of the business. He referred in some detail to the secrecy with which Alexander had approached the question of control of Skylly in Curacao both in 1969 and in the recent proceedings.

49. Mr. Litton for Alexander and for Skylly examined the history of the Hongkong Company chronologically (for which I was most grateful) I found that his doing so of considerable assistance. He postulated the existence of six "time-slots" as he referred to them. The first from the year 1952 to the 23rd of July 1968 (the date of the death of K.Y. Shang); the second from the 6th October 1967 (the date of the default judgment) to the 24th January 1969 (the date of the meeting in Curacao when Mr. Litton suggested Mr. Wong was ousted from control of Skylly); The third from the 24th January 1969 to the 18th December 1970 (the date of the first proposals to the petitioner). He suggested strongly that if Alexander was right in his claim to exercise the voting rights in Skylly the only criticism that could be made of him up to this stage was that he ought to have put the company on a proper footing earlier than the 18th December 1970, Alexander he suggested could not cause a general meeting to be held because at most he controlled his own 2,000 shares and 75,000 shares would not be enough to form a quorum. Once a quorum was obtained he suggested that the deadlock could be resolved. Up to this period Alexander could not possibly be said to have usurped anybody's rights. He should be regarded as the saviour of the company rather than as a usurper. His fourth time-slot was from the 18th December 1970 to the 13th September 1972 that is to say the date on which Alexander's overtures were finally rejected by the petitioner. His fifth time-slot was from the 31st of July 1973 to the 10th September 1973 and his sixth the continuing situation. Mr. Littonthen analysed each of the time-slots which he had mentioned suggesting that prior to the death of K.Y. Shang the shareholders were active until the default judgment had been obtained. There was then a mixed Board of Directors. Throughout this period Alexander's participation was that of an assistant to his late father. As to the second time-slot that is between the date of the default judgment and the 24th of January 1969 Mr. Litton suggested that it was the responsibility of the shareholders to put their company in order. Alexander had no individual responsibility to do so. There had been the meeting of three on the 26th December 1967 and until the 24th January 1969 Mr. Wong's position as Managing Director of Skylly had been unchallonged. Mr. Wong and the petitioner and the Chow family together could have called a general meeting. It was no fault of Alexander that they failed to do so. After the 24th January 1969 assuming that Alexander was Managing Director of Skylly and was entitled to vote the 75,000 shares vested in that company the petitioners could have applied to the court for an order under Section 114(2) of the Companies Ordinance that a meeting should be held. The court could have dealt with the question of a quorum. Mr. Litton suggested that the letter to the petitioner of the 18th December 1970 was a proper attempt by Alexander to regularise the position. It was not unusual for Alexander to continue to manage the business as he had done so during the life time of K.Y. Shang and later after his death. The only criticism, Mr. Litton suggested, that could be levelled at Alexander during this period was his failure to approach the petitioner earlier. His fourth time-slot was the period of time taking by the petitioner to consider the proposal put forward by Alexander. [Mr. Litton did not deal with the period between the final rejection by the petitioner of Alexander's proposals and the date of the presentation of the petition.] His sixth time-slot was the continuing situation. There could, he suggested, be at no question of oppression of a minority shareholding group. Alexander himself was the holder of no more than 2,000 shares. Skylly was itself a minority and he suggested that all the oppression cases where oppression on a minority by a majority of shareholders. He distinguished the Westbourne Galleries Ltd. case⁽¹⁾ on the basis that that was a case where the shareholders were in opposite camps. In such cases a general meeting could not be a meaningful forum. In this case it could. The lack of confidence cases, were he suggested cases where the minority shareholding group had lost confidence for good reason in the majority. In general the cases quoted were a partnership type cases. As to the general equitable principles ground he suggested that the most important matter to consider here was the question of alternatives and that alternatives must be dismissed before the court would take the extreme steps of winding-up the company. He suggested four alternatives as possible and practical. The first was an injunction to compell Alexander to refrain from interference in the management of the company. The second an order of the court under Section 114(2) of the Companies Ordinance. The third an investigation by the Financial Secretary into theaffairs of the company. His fourth alternative called for the immediate appointment of the Official Receiver as Provisional Liquidator with liberty to him to apply on short notice for a Special Manager to be appointed of the assets until further order to carry on and maintain the business of the Hongkong Company and protect its assets and generally to act in the interests of the creditors and contributories. It further called for an order adjourning the petition until one week after the conclusion of a meeting to be ordered by the court to receive the accounts for 1966-72 to appoint directors and auditors. The quorum of such meeting could he suggested be two members personally present and holding at least one tenth of the issued capital. In support of this he argued that the bank had made it quite clear that they were unwilling to attend any meeting which would deprive it of the protection given by Article 48. This amounted to no more than saying that unless they could be assured of a benefit the minority would frustrate any step taking to regularise the company's affairs and he suggested that this was an improper attitude for the petitioner to take. At the conclusion of Mr. Litton's argument I was informed that the proceedings in Curacao had gone against Alexander and an affidavit was in course of preparation.

50. Mr. Bernacchi followed on behalf of Miss Shang and emphasised the necessity for the consideration of all alternatives. One of his contentions was that I should consider in these proceedings the possibility of the winding-up by this court of the China Can Company ! Its only assets in the Colony were the shares it held in a fiduciary capacity for the benefit of unknown and unnamed persons who might not be in the jurisdiction of the court so that the liquidator of the China Company could vote the shares held by the China Company in trust in a general meeting of the Hongkong Company so that those shares would be untied for voting purposes. The further alternative suggested was an offer which had been made by Miss Shang for the purchase of the shares held by the petitioner. The offer was for payment by instalments with the shares themselves being held as security. This offer however was one in which the petitioner was uninterested because of the provisions of Article 33 of the Company's Articles. He suggested that if a conditional liquidator and manager was appointed and a meeting directed to be held under Section 114 of the Ordinance the difficulty posed by Article 33 could be removed.

51. I was on the papers in no doubt but that the company had been irregularly carried on since the year 1965 that is for almost nine years; during this time the company had no board and no valid general meetings and its shareholders had had no accounts. It had been controlled by Alexander since the date of the default judgment without regard to the Companies Ordinance. Its accounts when produced had not been produced by him but proffered by his sister. They obviously required investigation. Throughout a period of nine years no dividends had been paid to the shareholders. One block of shares, those held by the China Company, was frozen. There was a dispute as to the right to vote another block - that held by Skylly. Because of these factors I decided that there were clearly grounds for winding-up and before any alternative to winding-up could be entertained I must consider how speedily that alternative could be effected. It is quite clear that there was no hope for settlement. It is equally clear that the position in Curacao as to Skylly might well be the subject of appeals which would drag on indefinitely, so that any meeting ordered by the court was likely to be frustrated by rival claims for the right to vote the Skylly shares. It was unlikely that an injunction would be granted on interlocutory application. Indeed I was extremely doubtful if any injunction would be granted at all. For the petitioner had almost certainly been guilty of laches. At the very latest it knew on the 18th December 1970 that Alexander was running the business and it was guilty of delay in replying to Messrs. T.S. Tong & Co.'s letter. Having failed to take any proceedings from the 18th December 1970 to the 31st July 1973 it was highly unlikely that a court would assist it in any interlocutory application even if a winding-up order was refused on the basis that they could apply for an injunction. Indeed a question which has occasioned me most anxious consideration throughout this matter is whether I should, on the ground that it was just and equitable to do so, grant to the petitioners a winding-up order, having regard to this delay. An investigation by the Financial Secretary was equally no solution. Firstly, because the Section empowering the Financial Secretary to direct an investigation confers a discretion on him not on the court; secondly because the Section is scarcely intended to apply to a private company of this kind and thirdly because such an investigation would inevitably lead to further delay. Purchase of these shares by Miss Shang with payment by instalments who had equally no speedy solution. There was no evidence before me whatsoever as to her financial position, and indeed she was described as no more than the cashier in the company and the holder of a small number of shares. The draft order proposed by Mr. Litton also failed to offer a workable solution particularly when one appreciated that at the time I was called upon to make or refuse an order in the matter Mr. Wong was by virtue of the order of the judge of first instance in Curacao the Managing Director of "the" Skylly which supported the petition. As to the appointment of a Board by the court and the Board running the company this was not a practical proposition either. When ordering that Miscellaneous Proceedings No. 85 of 1974 should be struck out I had done so without prejudice to the initiation by Alexander of proceedings by way of action. The possibility of any such action would be sufficient to dissuade any responsible person in the private sector from accepting a position on the Board of the company. Further a strict investigation as to the accounts of the company is required, in particular as to the granting of bonuses and as to the cash "in hand" which on the last account amounted to a sum of $2,030,766.53. The very fact that no accounts were produced until they were produced by Miss Shang and that they were then unvouched having regard to the period of time involved that is to say from 1966 to date is sufficient to necessitate winding-up. I cannot regard any remedy other than winding-up as satisfactory.

52. I finally turn to the question whether the prolonged delay on the part of the present petitioner is fatal to the application. As I see it a petitioner in winding-up under the just and equitable rule is not a litigant in the ordinary sense. He comes to court seeking a statutory remedy rather than an equitable one and hence his laches is not fatal nor is his refusal to attend a meeting called by Alexander with the backing of the disputed shares in Skylly. Even assuming, as the petitioner apparently did assume at that time, that Alexander's claim that he was entitled to exercise the voting power conferred by them was valid it would be quite wrong for me to deny the remedy sought on the basis that the petitioner refused to co-operate with Alexander when Alexander refused to commit himself as to his intentions particularly when the company had been irregularly run for several years prior thereto. It was in my view neither in the public interest nor in the interest of the shareholders of the company that the situation existing should continue. I could find no satisfactory remedy other than a winding-up order. Accordingly I made a winding-up order. At the request of the Official Receiver I suspended it for one day for the purpose of enabling a Special Manager to be appointed. The petitioners asked for no more than that their costs be taxed and paid out from the assets of the company. I granted this application together with one set of costs for the contributories supporting the petition to be similarly paid out of the company's assets, those opposing the petition to pay their own costs.

Representation:

Mr. Wright (Philip Kemedios & Co.) for Petitioner.

Mr. Jackson-Lipkin (Brutton & Stewart) for W.K. Shang and Skylly Inc. N.V.

Mr. Jackson-Lipkin (J.S. & M.) for R.I. Shang.

Mr. Litton, Q.C. and Danis Chang (T.S. Tong & Co.) for Respondent.

Mr. North for Official Receiver.

(1) (1973) A.C. 360.

(2) (1951) V.L.R. 458.

(3) (1916) 32 T.L.R. 253.

(4) (1942) V.L.R. 222.

(5) (1924) S.C. 83.

(6) (1962) Ch. 257.