Re Boldwin Construction Co. Ltd.

HCCW 340/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 340 OF 2002

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HCCW 345/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 345 OF 2002

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HCCW 346/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 346 OF 2002

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HCCW 691/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 691 OF 2004

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(Heard together)

Before: Hon Kwan J in Court

Date of Hearing: 8 February 2006

Date of Judgment: 8 February 2006

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J U D G M E N T

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1.There are listed before me 4 petitions for the winding up of 4 companies - Boldwin Construction Company Limited (“Boldwin”), Maintain Profits Limited (“MPL”), Myriad Gold Corporation (“MGC”) and BF Construction Company Limited (“BF”).

2.These are companies owned wholly or substantially by Madam Law Wai Duen and Dr Chan Shiu Chick.  Only Boldwin and BF have been carrying on business as building contractor.  As a result of their matrimonial dispute, Madam Law presented or caused to be presented petitions to wind up Boldwin, MPL and MGC and applied for the appointment of provisional liquidators to these companies.  Junestar Investment Corporation (“Junestar”) is the petitioner in the petition against Boldwin.  Madam Law is the petitioner in the petitions against MPL and MGC.  An order was made on 31 October 2002 to appoint provisional liquidators for these 3 companies.

3.The shares in BF are held by MPL and MGC.  On 11 June 2004, the provisional liquidators of MPL and MGC passed a special resolution as the contributories of BF that it should be wound up.  On 12 June 2004, the provisional liquidators presented a petition by MPL and MGC to wind up BF under section 177(1)(a) of the Companies Ordinance, Cap. 32 pursuant to the special resolution as well as on the just and equitable ground.  On 18 June 2004, the provisional liquidators of Boldwin, MPL and MGC were also appointed the provisional liquidators of BF.

4.In the petition regarding Boldwin, apart from Dr Chan, 7 creditors have also given notice of intention to appear on the petition and to oppose it.  No evidence has been filed by any of them.  The provisional liquidators have provided a letter from a creditor, Gilman Industrial Limited, dated 2 February 2006 in which it stated that it would support the winding-up petition.  According to a schedule exhibited to the 6^th affirmation of Dr Chan, the debts owed to this creditor and 2 companies associated with it are in the region of $11 million, that is about 4% of indebtedness to sub-contractors and 2% of the total indebtedness of Boldwin, on Dr Chan’s calculation.

5.For the petitions regarding MPL and MGC, only Dr Chan has given notice of intention to appear and to oppose.

6.In the petition concerning BF, only Dr Chan and Madam Law have filed a notice of intention to appear.  On 9 December 2004, I exercised my discretion to hear Dr Chan and Madam Law in this petition as amici curiae, as Dr Chan and Madam Law hold all the shares of MPL and MGC and these companies in turn hold all the shares in BF.

7.On 5 September 2005, Madam Law and Dr Chan entered into a deed of settlement to settle all their disputes and claims.  This deed of settlement has not been placed before the court.  What is known about it is that one of the conditions of settlement is that Madam Law, on behalf of herself and Junestar, has to give consent to the dismissal of the petitions against the 4 companies.

8.On 18 January 2006, Dr Chan issued a summons in respect of each of the 4 winding-up proceedings seeking dismissal of the petition.

9.The provisional liquidators have prepared 2 very detailed reports dated 19 January 2006, which were circulated to the creditors of Boldwin and BF before this hearing.  In these reports, the creditors were given an account of the affairs of these companies, the main tasks performed by the provisional liquidators, the misfeasance allegations against Dr Chan, the progress of arbitration proceedings, and the estimated return to creditors in a liquidation scenario.  The reports were to assist the creditors whether to support or oppose the winding-up petitions.  They were encouraged to express their views and were informed of the hearing today.

10.Other than a representative of Gilman Industrial Limited, no creditor that is present in court today has addressed the court on its position regarding any of the petitions when extended the opportunity to do so.  The representative of Gilman Industrial Limited sought clarification of an assurance given by Mr Grossman, SC in respect of Boldwin, which I shall come to.

11.As Madam Law has indicated clearly she would not proceed with the petitions she presented or caused to be presented against Boldwin, MPL and MGC, is there any reason why the court should not accede to Dr Chan’s application to dismiss these petitions?

12.Mr Harris for the provisional liquidators has queried the locus of Dr Chan to apply for dismissal of the petition against BF.  But leaving aside locus, it is clearly within the power of this court to dismiss this petition if it is appropriate to do so.

13.Other than Gilman Industrial Limited, which has given notice that it supports the petition against Boldwin, no other creditor has filed any notice of intention to appear and to support the petition or made any application to be substituted as petitioner on any of the petitions.

14.Mr Harris submitted that Boldwin would appear to be insolvent to the extent of $37 million on Dr Chan’s estimate in his latest affirmation and for an insolvent company, the court must be vigilant to protect the interests of creditors and the public and would not allow a petition to be dismissed merely because of an agreement reached between the petitioner and the debtor company.  As for BF, Mr Harris asked the court to adjourn the petition so that the creditors could be clearly told by the provisional liquidators of the possibility of dismissal of the petitions as Madam Law has lent her support to dismissal.

15.From the evidence filed by Dr Chan, he has been engaged in negotiation with the creditors separately and has come to some provisional agreement with some of them on their claims and/or obtained the consent or support to his application for dismissal of the petitions.  As provisional liquidators have been appointed for Boldwin and BF, Dr Chan has no authority to enter into any binding agreement for these companies with the creditors.  On the figures provided in his last affirmation, the latest position is that he has reached a provisional agreement with 75.59% of the creditors of Boldwin and 81.96% of the creditors of BF.  This calculation does not include the claims of the project employers, which are the subsidiaries of the Cheung Kong Group.  If the claims of Cheung Kong are included, the percentage of creditors that would support a dismissal of the petitions would be 88.07% for Boldwin and 91.51% for BF.

16.Dr Chan also deposed that he has signed conditional agreements with the Cheung Kong Group yesterday.  The settlement agreement is that conditional upon the dismissal of all the winding-up petitions and the discharge of the provisional liquidators, the employers will pay the agreed sums of money to Boldwin and BF in settlement of all the claims and counterclaims between them.  Dr Chan is not allowed to disclose the settlement sums because of confidentiality provisions in the conditional agreements, but Mr Grossman has assured this court that the amounts to be received by Boldwin from the Cheung Kong Group under the settlement would be amply sufficient to wipe out the existing net indebtedness of Boldwin estimated at $37 million and restore the company to solvency.  I am prepared to accept this assurance from counsel.

17.Miss Linda Chan for Madam Law submitted that unless and until it can be proved that Boldwin and BF are insolvent, the creditors have no interest in the winding up of these companies as their debts, if substantiated, would be paid in full.  The solvency of these companies is not certain because of the contingent nature of a significant portion of the liabilities and assets.  But according to the estimate provided by the provisional liquidators in their latest reports to the creditors in January 2006, the indication seems to be that these companies are solvent.  The estimated surplus in BF of $184.82 million includes the misfeasance claim against Dr Chan at $20 million and the estimated surplus in Boldwin of $55.86 million includes the misfeasance claim against Dr Chan at $45 million.  Mr Grossman pointed out that on the provisional liquidators’ estimate, even if nothing were recovered from the misfeasance claims, there should still be a surplus of assets for both companies.

18.Miss Chan further submitted that the interests of creditors would not be prejudiced in the sense that it would always be open for them to petition for winding up if they are unable to get payment after the existing petitions are dismissed.  So far no creditor has applied to be substituted as petitioner.  I do not see any point in adjourning the petition of BF as it seems to me that the creditors, most of whom have been in negotiation with Dr Chan, should be aware of the position today and must be alive to the possibility of a dismissal of the petition.

19.As for the misfeasance claims against Dr Chan, Mr Grossman has dealt with them in his written submissions.  It is relevant to take into account that many of the allegations would depend on the understanding between Madam Law and Dr Chan and Madam Law is in a position to ratify the acts complained of.  No other shareholder has made any complaints.  As a result of the conditional settlement agreement between them, Madam Law would no longer dispute the understanding between them as put forward by Dr Chan.  Dr Chan has also undertaken in his latest affirmation that if the petitions are dismissed, he will ensure that Boldwin and BF will comply with Cap. 32 and prepare audited annual reports.

20.I take note that Madam Law and Dr Chan have come a long way to reach an overall settlement.  If a deed of settlement cannot be implemented because the petitions are not dismissed, the parties may have to continue with the present and other proceedings.  Substantial costs and time would be wasted.

21.I am persuaded that it is appropriate in these circumstances to dismiss the petitions and to discharge the provisional liquidators from their office.

22.I understand it has been agreed between Madam Law and Dr Chan that Junestar and Madam Law will not seek any costs order against the companies or against Dr Chan in these winding-up proceedings.

23.I order the petition against each of the 4 companies to be dismissed, and I discharge the provisional liquidators from their office in respect of each of the companies.  I would deal with the consequential orders to be made on the discharge of the provisional liquidators on paper, after the provisional liquidators have considered the draft orders proposed by Dr Chan and Madam Law.

Mr Jonathan Harris, instructed by Messrs Stephenson, Harwood & Lo, for the Provisional Liquidators in all cases

Miss Linda Chan, instructed by Messrs Baker & McKenzie, for Junestar Investment Corporation in HCCW No. 340 of 2002

and Madam Law Wai Duen, Nina in all other cases

Mr Clive Grossman, SC & Ms. Chyvette Ip, instructed by Messrs Ng & Partners, for Dr Chan Siu Chick in all cases

The Official Receiver, attendance excused