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Chan Yu Hong v. Lam Hong and Others

Read the full judgment text of HCCW 90/2005 on BabelCite. This High Court CFI judgment was delivered on 16 February 2005 before Hon Kwan J.

Companies (Winding-up) – validation order – s.182 Companies Ordinance – solvent company – shareholder dispute – ordinary course of business – conditions – monthly cap – weekly schedule – inspection rights – costs in cause – Company engaged in logistics and forwarding – petition presented on 31 January 2005 – company solvent with net assets HK$4.1 million – monthly expenses HK$3.8 million – validation order granted with conditions – costs in cause.

Legal issues: Validation order under section 182

Outcome: Validation order granted subject to conditions.

Case No.HCCW 90/2005
Court
High Court CFI
Date16 Feb 2005
JudgeHon Kwan J
Case Document
100%Judiciary

HCCW 90/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 90 OF 2005

____________

　 IN THE MATTER of SMART WIN SHIPPING (HK) LIMITED
　 and
　 IN THE MATTER of the Companies Ordinance (Cap. 32)

____________

BETWEEN

　 CHAN YU HONG Petitioner
　 and 　
　 LAM HONG 1st Respondent
  LAM KWOK HUNG 2ndRespondent
  SMART WIN SHIPPING (HK) LIMITED 3rd Respondent
  RUTH SU-CHING CHANG 4thRespondent
  LEE KWOK KEUNG 5thRespondent

____________

Before: Hon Kwan J in Chambers

Date of Hearing: 16 February 2005

Date of Decision: 16 February 2005

_____________

D E C I S I O N

_____________

1.I have before me an application made by Smart Win Shipping (HK) Limited (“the Company”) for a validation order under section 182 of the Companies Ordinance, Cap. 32.  The Company seeks an order that no payment made from the date of the presentation of the petition being 31 January 2005 to the date of the hearing of the petition or further order into or out of the bank accounts of the Company with HSBC in the ordinary course of business shall be avoided by section 182.

2.The petition was presented by a shareholder, Chan Yu Hong, seeking relief under Section 168A and for winding up on the just and equitable ground.  It would appear from the evidence before the court that the Company is solvent and has been trading profitably.  The Company is engaged in the business of a logistics and forwarding agent, and has been doing so since its incorporation in January 2000.  From the audited accounts of the Company for the financial year ended 31 March 2004, it would appear that the Company had net assets of HK$3.3 million odd with a turnover of over HK$60 million odd.  I have also the management accounts of the Company for the 9 months ended 31 December 2004 showing net assets of HK$4.1 million.  The Company has also produced bank statements as at 31 December 2004 with cash balances of over HK$2.4 million.  

3.The Official Receiver has no objection to this application as this is a shareholders’ dispute and there is no indication that the Company is insolvent.  As for the petitioner, he does not oppose in principle a validation order but has asked the court to impose a limit of withdrawal from the bank accounts capped at HK$800,000.00 a month.  The petitioner stated that it was within his knowledge that expenses should not exceed that figure.  However, he has not produced any or any cogent evidence to back up his assertion.

4.The Company has filed evidence to explain the amount of average expenses incurred a month in the ordinary course of business of the Company.  The figure came up to HK$3.8 million a month.  This was arrived at by taking the total cost of income from the figure in the management accounts of HK$30.6 million plus the total operating expenses of HK$3.4 million and dividing the aggregate by 9 to arrive at the monthly figure.  The cost of income figure was made up of outward freight expenses.

5.I have compared the figures in the management accounts with the figures in the audited accounts of the Company for the financial years ended March 2003 and March 2004.  It seems to me that the figures in the management accounts are on a par with the figures in the audited accounts.  I see no reason not to accept the Company’s evidence in this respect that the average expenses per month in the ordinary course of business would be in the region of HK$3.8 million.

6.I am satisfied this is an appropriate case to make a validation order and I will do so subject to the following conditions:

(i) the total withdrawals from the Company’s bank accounts are to be capped at HK$4 million a month;
   
(ii) the Company is to provide, until further order of the court, the petitioner’s solicitors with a weekly schedule on each Monday identifying in relation to the preceding week, the date, amount, payee and purpose of each payment made out of the Company’s bank accounts, and identifying each payee by name and address; and
   
(iii) the petitioner is to be permitted to inspect on 3 working days’ notice all existing documents supporting or evidencing each payment out of the Company’s bank accounts.

7.I should also mention that I have the undertaking of the Company’s counsel that the Company would abide by the conditions imposed.

8.As for the costs of this application, I order that the costs be in the cause of the petition.

　 (S Kwan)
　 Judge of the Court of First Instance
　 High Court

Mr Luk Wing Hung of Messrs C L Chow & Macksion Chan, for the Petitioner

Mr Ivan Cheung instructed by Messrs Francis Kong & Co., for the 1st to 3rd Respendents

The Official Receiver, attendance excused