Re Parvions Lines Ltd

HCCW000037/1977

IN THE SUPREME COURT OF HONG KONG

COMPANIES WINDING-UP NO.37 OF 1977

Coram: Hon. Clough, J.

Date: 25 OCT 1983

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JUDGMENT

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1. These are my reasons for my order made on the 21st July 1983 declaring, under Section 275(1) of the Companies ordinance (Cap. 32) that the respondent Mr. Maqbool Ahmed Shaikh was knowingly a party to carrying on the business of the above mentioned Company with intent to defraud creditors of the Company and for other fraudulent purposes and that he is responsible without limitation of liability for all debts of the Company to the 1st Applicant Apostolos Andreas Shipping Company Limited, a Cyprus company, for all the debts of the Company to the 1st Applicant.

2. The order also directed the respondent under Section 275(2) of the Ordinance to pay the 1st Applicant the sum of HK$752,463.71 and HK$788.35 with interest as therein mentioned, being the Hong Kong currency equivalent of the sums which the Company had been ordered to pay the 1st Applicant under a judgment dated the 5th March 1977 of the High Court of the Republic of Singapore which was registered in Hong Kong pursuant to the order of Mr. Registrar Cameron dated the 23rd March 1977 made under the Foreign Judgment (Reciprocal Enforcement) Ordinance (Cap. 319).

3. The originating summons making the application was originally issued on the 2nd July 1982 by the 1st Applicant and Transatlantic Seaways Limited, an English registered company, but the latter company did not, in the event, pursue the application.

Background

4. The Company now in the process of being wound up is a private limited company with a nominal capital of $100,000.00 divided into 1,000 shares of $100.00 each. Its paid up capital amounted to $2,200.00. Its objects included the carrying on of the business of chartering ships. The Company had a registered office at Room 310, Man Yee Building. 67 Queen's Road, Central, Hong Kong.

5. At the hearing, counsel for the Official Receiver informed the Court that the Company had no legal or beneficial title to its office premises which were a registered office in name only. The Company shared the premises with Parvinos Campania Naviera S.A. ("Parvinos"), an associated company registered in Panama and with Betaway Trading limited, a company registered in Hong Kong and under the control of Mr. Town Shek Loong. Mr. Town Shek Long is a friend of the Respondent and a director of the above mentioned Company.

6. Under circumstances which I will refer to below, the Company chartered a vessel called the "Aftadelfos" from the 1st Applicant on the 2nd July 1976. The Company fell into arrears on its hire payments and on the 12th January 1977 the 1st Applicant issued a writ in the High Court in Singapore against the Company, Parvinos and the two agents of the Company in Singapore to recover the arrears in respect of the period between the 8th November 1976 and the 23rd January 1977 under the charter party. The sum of S$398,973.34, being the equivalent of US$162,151.33 was claimed.

7. Those advising the 1st Applicant did their best to freeze freight in the hands of the Company's agents in Singapore by obtaining a "Mareva" Injunction, but this exercise proved to be fruitless. The 1st Applicant took similar action in Hon Kong where, on the 20th January 1977, it issued a writ against the Company, Parvinos and Fairwind Shipping Limited. The latter company were the agents of the Company. As in the case of the Singapore action, a sum of US$162,151.33 was specified in the writ as being the amount of hire payments in arrears in respect of the period from the 8th November 1976 to the 23rd January 1977 in respect of the chartering of the "Aftadelfos" and the equivalent sum in Hong Kong currency, namely HK$810,756.65 was claimed. Again a Mareva Injunction was obtained with the aim of freezing freight in the hands of the Company's agents, but this exercise proved to be fruitless.

8. On 5th of 1977, the 1st Applicant obtained judgment in the Singapore action in default of appearance against the Company for the sum of S$398,973.34 and S$418 costs. It was this judgment which was the subject of Mr. Registrar Cameron's order dated the 23rd March 1977 referred to above by virtue of which, the 1st Applicant was put in the same position as if it had obtained judgment in Hong Kong against the Company for HK$752,463.71 and HK$788.35 costs.

9. On the 26th April 1977, the 1st Applicant sought to enforce the Hong Kong judgment by the issue of a Writ of Fi-fa, but the judgment was wholly unsatisfied, the Bailiff reporting on the 12th May 1977 to the 1st Applicant's solicitors to the effect that all the goods and chattels on the Company's premises were the property of Betaway Trading Limited.

10. Accordingly on the 22nd June 1977, the let Applicant presented a creditor's petition for the winding-up of the Company based on the Hong Kong judgment and the Company's insolvency and inability to pay its debts. On the 7th July 1977 the Company was ordered to be wound-up by the court. When the petition was heard, the Company did not appear. No other creditors or contributories appeared to oppose or support the petition and subsequently no creditors other than the 1st Applicant have proved in the winding-up proceedings. About 5 years later, on the 2nd July 1982. the Applicants issued the present summons against the Respondent under Section 275 of the Ordinance.

Service of Proceedings on the Respondent

11. When the summons was issued it was returnable on the 11th October 1982, but there were several adjournments necessitated by the inability of the 1st Applicant to serve the Respondent. Eventually on the 24th February 1983, the 1st Applicant obtained leave from Liu, J. pursuant to Order 11 rule 9(1) to serve the Respondent in Australia. Liu J. also ordered that the hearing of the Summons be in open court. In the event no service was effected under the order of Liu J. and on the 6th May 1983, the 1st Applicant obtained leave from Liu J. to serve the Respondent in Pakistan.

12. On the first hearing of the summons before me on the 14th June 1983, the Respondent did not appear. The 1st Applicant's evidence of service in Pakistan was contained in the affirmation of Mr. Mustafa Haider, a process-server in Karachi, filed on the 9th June 1983. Mr. Haider's evidence was to the following effect. He had taken the summons and "the papers attached therewith" including an affidavit of the 1st Applicant's solicitor, Mr. Jolly, to the bungalow of the Respondent in Karachi on the 15th May 1983 and informed him that he represented the Applicant's Hong Kong solicitors through his principals a firm of advocates in Karachi. He had then given the summons and papers to the Respondent. The Respondent had read the summons and briefly gone through the papers, but said he could not accept them without consulting his lawyers. After further conversation the Respondent refused to accept the papers or sign an acknowledgment of service and informed Mr. Haider that the papers should be sent to an address in Perth, Australia.

13. Mr. Haider's evidence was that he then took the summons and papers back to his principals. They instructed him to endeavour to deliver the documents to the Respondent's address. Accordingly on the 29th May 1983, Mr. Haider went to the Respondent's bungalow and there gave the summons and papers to an employee of the Respondent who informed him that the Respondent was abroad but agreed to accept them after being requested by Mr. Haider to deliver them to the Respondent as soon as possible.

14. The effect of Rule 58(1)(b) of the Companies (Winding-up) Rules is that the summons in this case is required to be served on the Respondent in the same manner as the Rules of the Supreme Court require the service of an originating summons, that is personally, unless otherwise ordered by the court. I declined to accede to the submission of counsel for the 1st Applicant that the order of Liu, J. made on the 6th May 1983 authorising service of the Respondent in Pakistan should be interpreted as authorising service by leaving the summons and papers at the Respondent's address in Pakistan. However, having regard to the events which took place when Mr. Haider purported to serve the summons' and papers on the Respondent, I granted counsel for the 1st Applicant's application under Rule 58(1) of the Companies (Winding-up) Rules and ordered that the purported service effected by Mr. Mustafa Haider on the 15th and 29th May 1983 be deemed sufficient service of these proceedings on the Respondent.

15. On the resumed hearing on the 29th June 1983, counsel for the 1st Applicant undertook to file a further affidavit by Mr. Edwards, a solicitor in Mr. Jolly's firm, confirming that the affidavit of Mr. Jolly made on the 23rd February 1983 had been sent to the principals of Mr. Haider, the process-server. Having accepted counsel's submission that under Rule 58, personal service of the affidavit in question was not required and that it had been left at the Respondent's last known address within the terms of Order 65 rule 5(1)(a) and (2)(b), I accepted that the affidavit of Mr. Jolly had been properly served upon the Respondent. I considered that Rule 210 of the Companies (Winding-Up) Rules authorised such service in accordance with the Rules of the Supreme Court and that the provisions of Rule 20 of the Companies (Winding-Up) Rules regarding postal service were permissive and not mandatory.

16. The Respondent not having appeared on the 29th June 1983, I ordered, pursuant to Rule 58(2), that at the resumed hearing of the application the affidavit evidence filed on behalf of the 1st Applicant in the form of Mr. Jolly's affidavit sworn on the 23rd February 1983 might be adduced and that no oral evidence be recorded in the absence of any application in that behalf by the Respondent.

Onus and Standard of Proof

17. At the resumed and effective hearing on the 21st July 1983 counsel for the 1st Applicant opened by accepting that, in discharging the onus which is upon his client of proving the allegations of fraud made against the Respondent under Section 275(1), a high standard of proof was required because the necessary implication of a declaration against the Respondent under Section 275(1) was that he had committed an offence under Section 275(3). I agree. I have throughout considered the evidence adduced on behalf of the 1st Applicant in this application on the footing that although these are civil proceedings and the standard of proof imposed upon the 1st Applicant is a standard requiring it to prove its allegations on tile balance of probabilities, nevertheless the degree of probability must be commensurate with the occasion and pro-portionate to the subject matter: See Hornal v. Neuberger Products Ltd. (1957) 1 Q.B. 247 (C.A.) as applied in Reg. v. Home Secretary. Exp. Khawaja. (1983) 2 W.L.R. 321 (H.L.).

18. This being a case in which criminal fraud has been alleged against the Respondent I have borne in mind, in particular, the observation of Morris L.J. In Hornal v. Neuberger Products Ltd. (Supra.) at p. 266 that -

"Though no court and no jury would give less careful attention to issues lacking gravity than to those marked by it, the very elements of gravity become a part of the whole range of circumstances which have to be weighed in the scale when deciding as to the balance of probabilities."

Evidence and Findings

19. The evidence relied upon by the 1st Applicant is contained in the affidavit of Mr. Jolly sworn on the 23rd February 1983 together with numerous exhibits thereto which included various affidavits and exhibits which were filed in the Singapore and Hong Kong actions.

20. The copies of the statutory returns exhibited to Mr. Jolly's affidavit showed, and, as they both subsequently admitted to Mr. Patel of the Official Receiver's Department, Messr. Town Shek Loong and Riaz H. Sheikh were the original subscribing members of the Company who had been requested by the Respondent to assist him in incorporating it. The returns showed that at all material times subsequent to the 26th February 1976, the Respondent and his wife Parvin M. Shaik together held 20 out of the 22 issued shares in the Company and that the Respondent and his wife were the directors of the Company together with Mr. Riaz H. Sheikh.

21. According to attendance notes of Mr. Patel of the Official Receiver's Department exhibited to Mr. Jolly's affidavit both Mr. Town Shek Loong and Mr. Riaz H. Sheikh denied categorically to Mr. Patel that they had any hand in the running of the business which they alleged was that of the Respondent. According to Mr. Patel's attendance note of an interview with Mr. Town Shek Loong on the 29th September 1977 Mr. Town Shek Loong said, inter alia, that after he had transferred his subscriber's share (which the returns showed him to have done on the 28th February 1976) he had no hand in the running of the Company and it was the Respondent who was "the administrator of the Company". He was also recorded by Mr. Patel as saying that although the Respondent was a resident in Australia he was "all the time on the move from place to place" and that the Company maintained a correspondence office in Hong Kong and all its business was transacted outside Hong Kong.

22. According to Mr. Patel's attendance note of an interview with Mr. Riaz H. Sheikh on the 4th October 1977 the latter insisted that he had no connection whatsoever with shipping and that his own business was in cotton and cotton yarn and that throughout his intention was only to help the Respondent, who was not a resident of Hong Kong, to operate his business under the incorporated name of the Company. Although he had sued the statutory returns as a director of the Company, he is recorded by Mr. Patel as telling him that he had only done this at the request of the Company's accountants who were instructed by the Respondent. When asked by Mr. Patel if he was willing to prepare the Company's Statement of Affairs, he is recorded by Mr. Patel as saying that he knew nothing at all about the Company and he had no records of it and had had no connection with the Respondent concerning the business activities of the Company or of the Respondent personally.

23. There was evidence which positively indicated that the Respondent was the moving force behind the Company and the person who had control of its trading activities. Mr. Jolly deposed to having been informed by the 1st Applicant's lawyer Mr. Rajkumar in Singapore that the Respondent had been in Singapore at or around the end of 1976 discussing the affairs of the Company. Further evidence in support of this is to be found in a letter dated the 15th February 1979 addressed to the 1st Applicant's solicitors by a Mr. E.M.I. Packwood of the Official Receiver's Department who interviewed Mr. David Wu, formerly of the Company's Hong Kong agent "Fairwind Shipping Limited". In this letter, which is exhibited to Mr. Jolly's affidavit, Mr. Packwood reports that Mr. Wu admitted to him that when on business in Singapore he had advised the Respondent on the Company's affairs.

24. Very clear indications of the direct involvement of the Respondent in the trading activities of the Company and his knowledge of those activities is reflected] in the telexes exhibited to the affidavit of Mr. Jolly. They relate to various dates at the end of 1976, from November that year until January 1977. They are by no means easy to read but there are various passages which are clearly discernible. For example, in one of them which appears to have been dispatched in December 1976, there is a clear reference to Mr. David Wu of "Fairwind" having returned from Singapore after meeting with the Respondent in connection with the Company's affairs followed by a statement that the Respondent had been caught in a situation whereby his freights were in Malaysia and India and would take about a week to remit to Singapore and a further statement that the Respondent had on that date flown to Bombay to expedite this matter.

25. In another telex apparently dispatched in December 1976, the Respondent is referred to as having paid for the discharge of a vessel called the "Moscha D" on certain understandings and he is referred to as having said that he had not forgotten the 1st Applicant's vessel, the "Aftadelfos" and that he would be making some proposal as soon as possible. The passage in the relevant telex is followed by the sardonic comment "Do not know whether he just blowing air again, but nothing else owners can really do, but wait and see".

26. Although most of the evidence is of a hearsay character, it all points to the Respondent being actively concerned in and actually directing the trading activities of the Company and therefore having full knowledge of those activities at all material times.

27. As to the allegations of fraud in connection with the Company's business, there are two main allegations made against the Respondent. One is that he procured the Company to perpetrate what Mr. Jolly deposed was in his experience a not uncommon form of fraud perpetrated by charterers in the shipping world.

28. This consists in the charterer paying just enough hire to the owner to get the vessel to sea with its cargo having himself collected as much freight as he can get into his hands. The charterer then defaults on payment of hire and thereby puts the unfortunate owner on the horns of a dilemma because if the vessel is turned round it is at risk of arrest in an action in rem at the instance of holders of bills of lading relating to the cargo. The last stage of this fraudulent scheme is, Mr. Jolly deposed, the disappearance of the defaulting charterer who hopes the owner will not consider it worthwhile to pursue him.

29. The second main allegation of fraud against the Respondent is that he procured the Company to trade on when it was clearly hopeless for him to do so and as a result the Applicant and all the creditors have suffered heavy financial loss. Counsel for the 1st Applicant contended that such conduct was fraudulent for the purposes of Section 275(1) and relied on the dictum of Maugham, J. In Re William C. Leitch Brothers Limited (1932) 2 Ch 71 at p. 77 where he observed that :

"if a company continues to carry on business and to incur debts at a time when there is to the knowledge of the directors no reasonable prospect of the creditors ever receiving payment of those debts, it is, in general, a proper inference that the company is carrying on business with intent to defraud".

30. In support of the 1st main allegation against the Respondent, the 1st Applicant relied on the following evidence contained in or exhibited to the affidavit of Mr. Jolly. By a Charter Party dated the 2nd July 1976, the Company chartered the Applicant's vessel "Aftadelfos" for a period of four months with the option of extending that period to six months. The rate of hire was US$2,700.00 per day (payable every 15 days in advance) including overtime plus a ballast bonus of US$5,000.00 together with the first hire payment. The vessel was to be delivered between the 10th and 30th July 1976. The option to extend the period of hire was exercised and the extended hire period would therefore have begun some time in November 1976.

31. By the 24th January 1977 Mr. Jolly deposed in his affidavit of that date in the Hong Kong action (where he repeated substantially the evidence in the Singapore action previously given by Mr. Lizardo, the 1st Applicant's Singapore agent, in his affidavit sworn in that action on 12th January 1977) that the Company owed the Applicant US$162,151.33 arrears of hire payments accrued due up to the 23rd January 1977.

32. The daily rate of hire being US$2,700.00 the arrears of US$162,151.33 represented about 60 days arrears of hire. If 60 days are counted back from the 23rd January 1977, the last payment of hire would relate to around the 23rd November 1976. But hire was payable 15 days in advance and this explains the claim in the writ issued in the Singapore action on the 12th January 1977 for arrears of US$162,151.33 in respect of the period from the 8th November 1976 to the 23rd January 1977. The same claim was also made in the Hong Kong action.

33. On the other hand, the combined evidence of Mr. Jolly and Mr. Lizardo in their affidavits in the Hong Kong and Singapore actions was that in late October 1976 the "Aftadelfos" loaded cargoes at Singapore and Port Klang and then sailed to Dubai where the vessel was at the time the affidavits of the two witnesses were sworn. Mr. Lizardo exhibited a copy of the manifest of the "Aftadelfos" showing its departure date for Dubai to be the 20th October 1976 with a mixed cargo.

34. Both Mr. Lizardo and Mr. Jolly exhibited to their affidavits, sworn in January 1977, copies of three bills of lading dated October 1976 relating to items of the cargo of the "Aftadelfos" indicating that the freight had been pre-paid. In an affidavit in the Singapore action sworn by the 1st Applicant's lawyer, Mr. Murphy, on the 12th January 1977, he deposed that the Company's agents in Singapore had confirmed that they had received the freight in respect of the cargoes loaded on board the "Aftadelfos at Singapore. He also deposed that the Company's agents at Port Klang had informed him that they had remitted the freight they had collected to the Company's agents in Singapore. Mr. Murphy added that his efforts to recover charter hire from the Company's Singapore agents were unsuccessful.

35. In his affidavit sworn on the 12th January 1977 in the Singapore action, Mr. Lizardo also deposed that at that time the "Aftadelfos" was still laden with cargoes loaded by the charterers and the owner's agents had said that it would take longer than the 23rd January 1977 for the cargoes to be dealt with and so the final claim for hire would exceed the then current claim for the period up to the 23rd January 1977.

36. The evidence sworn by Mr. Lizardo and Mr. Murphy in the Singapore action and by Mr. Jolly in the Hong Kong action was adduced in support of applications in both jurisdictions for "Mareva" injunctions primarily aimed at freezing the pre-paid freight in the hands of the Company's agents before it could be dissipated by the Company which had no other known assets in Singapore or Hong Kong. The allegation of fraud was therefore at that stage made solely in relation to the dealings between the 1st Applicant and the Company.

37. In my Judgment the evidence I have referred to above adduced in the Singapore and Hong Kong actions and exhibited to and relied on in Mr. Jolly's affidavit sworn in support of the present application on the 23rd February 1983 provides sufficient prima facie evidence of such a degree of cogency as reasonably to require the inference, in the absence of any evidence from the Respondent regarding the manner of disposal of the pre-paid freight, that the Company as the charterer of the "Aftadelfos" had adopted the dishonest stratagem of paying, l5 days in advance at some time in October, only sufficient charter hire payments to get the vessel to sea bound for Dubai on the 20th October 1976 after collecting pre-paid freight in respect of its cargo, and then defaulting on the subsequent charter hire payments.

38. In the absence of any further evidence from the Respondent, I conclude that the lst Applicant has proved on the balance of probabilities that the Company did adopt such a dishonest stratagem and that the Respondent eras knowingly a party to the Company's carrying on business in this way. Applying the test laid down by Maugham, J. is In Re Patrick and Lyon, Ltd. (1933) 1 Chi 786 at p. 790, I conclude that such conduct of the Company whilst under the management and direction of the Respondent was manifestly actual dishonesty and really morally blameworthy according to current notions of fair trading among commercial men. I also conclude that the Company's intent to defraud creditors of the Company and its fraudulent purpose has been established for the purposes of Section 275(1) of the Companies Ordinance.

39. I am fortified in this conclusion by the evidence of the Respondent's conduct since the Company has been the subject of winding-up proceedings. Although there is evidence from the report of an inquiry agent exhibited to Mr. Jolly's affidavit that the Respondent is a man of considerable substance in Australia he has made no attempt to assist  the Official Receiver and has flagrantly attempted to evade service of these proceedings. Such conduct on the part of the Respondent is not that of an honest merchant whose company has been trading in accordance with accepted commercial standards and has simply suffered misfortune.

40. The fact that in this instance, it is only established that one creditor was defrauded in one transaction, does not, in my judgment, take the fraudulent conduct out of Section 275(1): see the  observations of Templeman, J. In re Cooper Chemical Limited (1978) Ch 262 at p. 268A - D.

41. As to the second main allegation of fraud against the Respondent in that he procured the Company to trade on and incur liabilities when it was clearly hopeless for him to do so, the evidence relied on by the Applicant and contained in the affidavit of Mr. Jolly sworn on the 23rd February 1983 was to the following effect.

42. He deposed that his inquiries had brought to light that at the end of 1976 and in early 1977, the. Company had a number of vessels on charter, in addition to the 1st Applicant's vessel, the "Aftadelfos", namely:-

Mr. Jolly exhibited copies of all the Charterparties relating to all the above mentioned vessels except the "Orient Prosperity".

43. He also deposed that the 1st Applicant's Singapore lawyer had informed him on the 11th January 1977 that the Company might be about to charter a vessel called the "Nachisan" which was then in Hong Kong. I mention, in this connection, that in his second affidavit in the Singapore action, Mr. Lizardo had exhibited copies of advertisements placed in the Singapore Times by the Company advertising for cargoes for its vessels. In two of these advertisements dated the 31st December 1976 and 7th January 1977 respectively, the "Nachisan" was advertised as one of the Company's vessels loading on specified dates in January 1977 at Singapore and Port Klan for various other ports in Pakistan and the Gulf.

44. Mr. Jolly deposed that when he made inquiries in Hong Kong from shipping agents he discovered that the Company had made an agreement to charter the "Nachisan" for two years with delivery at the end of January 1977, but subsequently, on the 15th January 1977, he heard that the owner of the vessel had chartered it elsewhere under a new name. Mr. Jolly attributed this change of mind on the part of the vessel's owner to his having heard of the legal proceedings in Singapore by the 1st Applicant resulting from the default of the Company in paying charter hire in respect of the "Aftadelfos".

45. The telexes exhibited to Mr. Jolly's affidavit made on the 23rd February 1983 were also relied on on behalf of the 1st Applicant to show that towards the end of 1976 the Company was in arrears in respect of hire payments in respect of other vessels in addition to the "Aftadelfos". Mr. Jolly deposed that " Notwithstanding the state of affairs, the Defendant company, as late as the end of October 1976, has taken new responsibility with regard to the "'UNIVERSE STAR" and was attempting although unsuccessfully to take a further financial burden in respect of the "NACHISAN".

46. Later in his evidence in a forensic passage of his affidavit Mr. Jolly submitted that the Respondent by failing to assist the Official Receiver in the winding-up of the Company had demonstrated his knowledge "...... that he attempted to continue trading whilst it was clearly hopeless for him to do so and as a result a number of creditors apart from the Applicant in this matter have suffered considerable financial loss".

47. As to the taking on of new financial obligation by the Company in the form of the "one time" charter of the "Universe Star" under the Charterparty dated the 30th October 1976, counsel for: the 1st Applicant was not able to identify to me any evidence of any arrears of the Company's charter hire payments as at the 30th October 1976.

48. Although many passages in the telexes were illegible, it was possible to ascertain from them that on the 11th January 1977 charter hire of US$102,916.26 was in arrears in respect of 40 days hire of the "Moscha D" and that the arrears dated back to the 27th November 1976. It could also be ascertained that by the 4th January 1977 the sum of US$49,000.00 was in arrears in respect of the "Golden Seagull" but, as the rate of charter hire was US$2,950.00 per day for that vessel, the arrears only seem to represent about 16 or 17 days hire and they are not identifiable as having been incurred before the 30th October 1976.

49. An unquantified amount could be seen to have been in arrears in respect of the "Minoutsi", but the Company had made the extension of the charter period of that vessel as early as the 20th July 1976 for a minimum period of 5 months from the 18th September 1976. Moreover the extension of the charter period of the "Aftadelfos" must have dated from November 1976.

50. Accordingly I was unable to find any evidence that the Company took on the additional financial burden of the "Universe Star" at the time when it was in arrears on charter payments in respect of any other vessel. The evidence of the attempt to charter the "Nachisan" was evidence of an attempt to assume such a burden, but in the absence of any evidence of the method of trading proposed and of the circumstances prompting the Company to negotiate for the vessel, I decline to speculate as to what they were.

51. I accept that there is evidence before me that in December 1976 and January 1977, the Company was in arrears in respect of all vessels named by Mr. Jolly as having been chartered by the Company except the "Orient Prosperity". At this time, the telexes showed that the Respondent was claiming to have "cash flow" problems, but I am not able to conclude that, being bound by the terms of the Charterparties, the Company can be said to have taken positive trading steps in a really morally blameworthy manner.

52. I have borne in mind that no creditors other than the 1st Applicant proved in the winding-up and there is no evidence one way or the other whether any of the other owners of vessels were ever ultimately paid the arrears of charter hire by the Company or the Respondent. The Official Receiver has not, for understandable reasons, investigated the circumstances under which the other Charterparties were negotiated or allowed to fall into arrears and, subject to the important exception of the "Aftadelfos", there is no evidence of the receipt of freight by the Company's agents.

53. Accordingly I was not persuaded that the evidence adduced on behalf of the 1st Applicant was of sufficient cogency to require or permit the reasonable inference, in the absence of any evidence from the Respondent, that the second main allegation of the Applicant had been established on the balance of probabilities.

The Order

54. However, having found that the first main allegation had been substantiated, I granted the 1st Applicant's application. I did not grant relief in the precise terms applied for in the Applicant's summons because the alleged debt of the Company referred to in paragraphs (1) and (3) of the Originating Summons was the sum of US$288,706.73 and not the sums of HK$752,463.71 and HK$788.35 or their Singapore or U.S. equivalents which were the subject of the Singapore and Hong Kong judgments. Apart from the question of the merger of the claim in the previous judgments, the amount of US$288,706.33 was an increased claim, presumably intended to embrace the increased final claim for hire payments beyond the 23rd January 1977 in respect of the "Aftadelfos" foreshadowed by Mr. Lizardo in his evidence in the Singapore action.

55. When I raised this point with counsel for the 1st Applicant and pointed out that there was no evidence before the court to substantiate the increased claim Mr. Patel, counsel for the Official Receiver, informed the court that the 1st Applicant's proof had not been adjudicated and no documents had been submitted to support the increased claim.

56. After taking instructions counsel for the 1st Applicant asked for a general declaration of indebtedness under Section 275(1) in accordance with paragraph (1) of the Originating Summons, omitting the reference to any specific amount of indebtedness and for a direction under Section 275(2) in accordance with paragraph (3) of the Originating Summons, but referring to the amount of the Hong Kong judgment debt.

57. I acceded to counsel's application and made the general declaration of personal indebtedness as sought by him because I had in mind the observations of Maugham J. In re William C. Leitch Brothers Ltd.(1932) 2 Chi 71. at p. 80 to the effect that under the corresponding provisions of the Company's Act 1929 a declaration could, in the discretion of the court, be made without any limitation of liability. However, I overlooked the same learned judge's earlier observations in the same case at pp. 78 and 79 to the effect that tae declaration should nevertheless actually state a specific amount for which the director is liable (albeit without any limitation of liability) because this is demonstrated to be necessary by the terms of Section 275(6) of the Act, which is reproduced in Section 275(6) of the Ordinance. I was unable to call in the order before it was perfected in order to reconsider its terms on this point, but I apprehend that, notwithstanding any flaw in the declaration contained in the order, the direction in paragraph 2 will suffice to give the 1st Applicant relief in the form of an enforceable obligation upon the Respondent to pay the sums therein specified.

58. Counsel for the Official Receiver had informed the court that the Official Receiver had notice of only one creditor, namely the 1st Applicant, and so the Official Receiver was not contending that any payment by the Respondent in respect of the Company's indebtedness should be directed to be paid to the Official Receiver as part of the Company's general assets to be available for the benefit of the creditors generally and not exclusively for the benefit of the 1st Applicant. As it is now about six years since the winding-up order was made on the 7th July 1977, this seemed to be a sensible concession.

59. There being no issue raised on behalf of the Official Receiver regarding the ultimate destination of any payment directed to be made by the Respondent personally under Section 275(2) of the Ordinance, I made the direction for payment sought by counsel for the 1st Applicant. I add that, had there been no concession on this point, I would have felt constrained in any event to give the direction for payment in reliance upon the majority decision of the English Court of Appeal In re Cyona Distributors-Ltd. (1967) 1 Chi. 889 (C.A.), notwithstanding the powerful dissent of Russell L.J. in that case following the earlier decision of Eve J. in In re William C. Leitch Brothers Ltd. (No.2)(1933) 1 Ch 261.

60. In the course of preparing this judgment, I have noticed that the perfected order contains a manifest slip because it refers to the Company as the Respondent. This produces the unintended result that in paragraph 2 of the order, the Company is expressed to be directed to pay the relevant sums to the 1st Applicant. I will call in the order when I hand down this judgment and make the necessary corrections to the order under the slip rule.

Representation:

Mr. Murray instructed by M/s Deacons for the applicants

Mr. Patel for Official Receiver