Re Curruthers Ltd (in Liquidation)

HCCW 709/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 709 OF 2001

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AND

HCCW 710/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 710 OF 2001

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(Heard Together)

Before: Hon Kwan J in Chambers

Date of Hearing: 23 February 2005

Date of Decision: 23 February 2005

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D E C I S I O N

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1.I have before me two amended summonses issued by the liquidators of two companies in liquidation, Curruthers Limited (“Curruthers”) and Leading Spirit Computer (Hong Kong) Limited (“Leading Spirit Computer”) (collectively “the Companies”).  These applications are made under sections 199(1)(a) and (c), and section 200 of the Companies Ordinance, Cap. 32, and/or the inherent jurisdiction of the court.  The liquidators seek the following orders:

(1)	sanction be given to the liquidators of the Companies for the appointment of both Messrs Deacons, solicitors and Messrs White & Case, solicitors, in respect of High Court Action No. 3133 of 2001 brought by the Companies against Kingston Finance Limited (“Kingston Finance”);
(2)	the costs, charges and expenses of Deacons and White & Case be paid out of the assets of the Companies as bills rendered;
(3)	the taxation procedure of the bills of these solicitors is to continue notwithstanding the lack of any certificate sanctioning the appointment of solicitors, with the order herein standing in its stead; and
(4)	the costs of these applications be paid out of the assets of the Companies.

2.The applications are necessary because there was no committee of inspection appointed for the Companies, and the applications are for retrospective sanction of the appointment of solicitors.

3.Leading Spirit High-Tech (Holdings) Company Limited (“LSHT”) is the ultimate holding company of Curruthers and Leading Spirit Computer.  LSHT was formerly listed on the Stock Exchange of Hong Kong Limited.  In May 2001, provisional liquidators were appointed for LSHT and an associated company, China DigiContent Limited (“CDC”).  However, following unsuccessful attempts to restructure the indebtedness of these companies, they were de-listed and have been wound up by the court in Bermuda.  In the order appointing provisional liquidators for LSHT, this provided, inter alia, that the costs, charges and expenses of all persons retained or employed by the provisional liquidators shall be paid as bills are rendered out of the assets of LSHT, and that the provisional liquidators are to take control of the subsidiaries and associated companies and take such action as they think fit for protecting the assets of LSHT.

4.The provisional liquidators sought to recover from Kingston Finance cash balances held in the securities trading account maintained with it by Leading Spirit Computer and Curruthers.  Kingston Finance refused to return the balances despite requests by letter of the provisional liquidators.  The provisional liquidators therefore instructed Deacons to institute the High Court Action against Kingston Finance, claiming an aggregate amount of HK$18 million odd.

5.On 13 July 2001, LSHT presented winding-up petitions against Curruthers and Leading Spirit Computer.  The winding-up orders were made on 10 October 2001.   Upon the winding-up orders being made, the High Court Action was left in abeyance pending the appointment of liquidators of the Companies.

6.On the appointment of liquidators of the Companies by orders made on 2 January 2002, they instructed Deacons to continue with the High Court Action.  Inadvertently, no authorisation was sought from the court under section 199 to do so.

7.On 10 September 2002, White & Case were appointed to act for the Companies in the High Court Action in place of Deacons.  Again, no application to appoint White & Case was made at that stage.

8.After the appointment of White & Case, settlement discussions were revived and this led to the execution of a deed of settlement of the High Court Action in December 2002, under which the Companies were to receive the total sum of HK$11.5 million.  The compromise was sanctioned by the court on 30 January 2003 and the High Court Action discontinued on 13 March 2003.

9.I understand that the recovery made by the liquidators in relation to Kingston Finance represented the biggest single recovery in the administration of the Leading Spirit Group as a whole.  Further, although there was no committee of inspection in respect of Curruthers and Leading Spirit Computer, there was an informal creditors’ committee in respect of LSHT and CDC consisting of the financial creditors.  These creditors were aware of and approved of the action against Kingston Finance.

10.I am satisfied that the appointment of solicitors to assist the liquidators was in the best interest of the Companies and their creditors and that such expenditure to engage solicitors was necessary.  The only question to address is the jurisdiction to grant retrospective sanction.

11.Mr Darton appearing for the liquidators accepted that it is questionable whether sanction for appointment of solicitors could be given retrospectively under section 199.  Instead, he relied on the power derived from section 200 (3) which provides that the liquidator may apply to the court in manner prescribed for directions in relation to any particular matter arising under the winding up.  He also relied on the inherent jurisdiction of the court to give retrospective sanction.  The case of Re Associated Travel Leisure and Services Limited (in liquidation)[1978] 2 All ER 273 at 275f-h was cited as authority in support of the proposition that the court would have power to give such retrospective sanction in a proper case, either under section 246(3) of the Companies Act 1948 (equivalent to our section 200(3)) or under the inherent power of the court.

12.Re Associated Travel Leisure was applied by Le Pichon J (as she then was) in Re Hoi Sing Construction Company Limited, HCCW No. 356 of 1997, 12 January 2000, in exercising the power of the court to ratify the appointment of additional members to the committee of inspection.

13.I am satisfied that I do have jurisdiction to grant retrospective sanction and that it is proper in the present circumstances to make the orders sought.  I therefore make an order in terms as sought mentioned in the earlier part of this decision.

Mr Robin Darton of Messrs White & Case, for the Applicants

The Official Receiver, attendance excused