Greatbo Holding Ltd v. Official Receiver and Others

HCMP 1676 / 2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1676 OF 2010

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Before: Hon Au J in Open Court

Date of hearing: 29^th September & 5^th October 2010

Date of Judgment: 5^th October 2010

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JUDGMENT

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1.This is an application for a declaration that the dissolution of Greatbo Investment Ltd (“the Company”) to have been void and that its name be restored to the register of companies by the Companies Registrar pursuant to section 290(1) of the Companies Ordinance (Cap 32).

2.Section 290(1) provides as follows:

“In the case of a company which has been dissolved under section 226A, 227, 239 or 248, the court may at any time within 2 years of the date of the dissolution, on any application being made for the purpose by the liquidator of the company or by any other person who appears to the court to be interested, make an order, upon such terms as the court thinks fit, declaring the dissolution to have been void, and thereupon such proceedings may be taken as might have been taken if the company had not been dissolved.”

3.The Court is thus given a wide discretion under this section to declare the dissolution of a company to have been void.   The Court has so exercised its power before to enable a company to be restored to deal with its interest in some remaining assets, when this is in the interest of the creditors and contributories of the company to do so. Cf: Re Element Development Ltd (unrep., HCMP 1105/2008, 3 October 2008, Kwan J), para 6-8; Re Matrix Industries Ltd [2004] 1 HKLRD 44 at 54B-C citing with approval Re Oakleague Ltd [1995] 2 BCLC 624 at 628b-e. 

4.The Company was incorporated in Hong Kong in 1992.   It is a 55% beneficial and registered shareholder of Foshan Huaju Real Estate Company Ltd, a Sino-foreign joint venture company incorporated in the PRC.  I will call this the JV Company in this Judgment.

5.The Company was ordered to be wound up by the Court on 17 December 1997 and the Official Receiver was appointed as the liquidator of the Company.

6.The present application is made by Greatbo Holding Ltd (the Plaintiff), which is the 80.83% shareholder of the Company. The Plaintiff’s present sole director and majority shareholder, a Mr Chen Kong Yin, has filed 2 affirmations[1] in support of the application. 

7.Mr Chen was formerly a director of the Company and also a director and the general manager of the JV Company.  He was however removed from these positions in mid 1995.  In September 1998, he became a majority shareholder and the sole director of the Plaintiff. 

8.In the present application, the Plaintiff explained that it was unaware that the Company was ordered to be wound up until late 1999 to early 2000, because it had not been informed of the same and no documents in relation to the winding up of the Company had been received by the Plaintiff before then. 

9.Since sometime in 2005, the Plaintiff through Mr Chen apparently had been negotiating with the Official Receiver to restructure the debts of the Company.  During these negotiations, the Plaintiff had apparently drawn the Official Receiver’s attention to the following assets  (“the Assets”) which it said the Company was entitled to and which had substantial value:

(1)  A land use right (“the Land Use Right”) for a land (“the Land”) located in Shachong management Zone, Lishui Town, Nanhai District, Foshan City, Guangdong Province in the Mainland. 

(2)  A significant number of unsold units of residential villas built on parts of the Land.

10.In light of these apparent assets, the Plaintiff urged the Official Receiver to convert the summary winding up of the Company to a formal liquidation, and to realize these assets.   Given these negotiations, and upon the Official Receiver’s Application, the Court made an Order on 30 April 2008 to dissolve the Company but the effect of it was extended for 2 years.  In other words, the dissolution would take effect on 30 April 2010. 

11.However, during the continued negotiations, the Official Receiver was not satisfied with the Plaintiff’s materials then provided to him that the Assets still belonged to the Company and could be realized and were of substantial value to justify the conversion of the summary winding up of the Company to a formal liquidation.  At the same time, the Official Receiver also asked the Plaintiff to confirm whether it would provide sufficient funding to him or to appoint an outside liquidator to carry out the formal liquidation of the Company.  Such confirmation was not readily forthcoming, as the Plaintiff seemed to maintain a position that the provision of funding should only be decided by all the creditors after and if the Official Receiver had decided to convert the liquidation process of the Company to a formal one, and to have successfully applied to set aside the above-mentioned order to dissolve the Company.

12.Eventually, nothing had since materialized from the negotiations, and the Company was formally dissolved on 30 April 2010 pursuant to the above-mentioned court order.

13.In the present application, the Plaintiff has provided (a) a PRC legal opinion to seek to show that the Land Use Right still belongs to the Company and (b) a formal valuation report compiled by Savills Valuation and Professional Services Ltd to show that the market value of the Land is to the extent of some RMB440,000,000.00. 

14.After reading the above evidence, I would accept that:

(1)  The legal opinion at least shows that there is prima facie evidence to show that the Company may still be regarded as the registered owner of one part of the Land, and that authorisation of the Company to make the necessary inquiry is required before it could ascertain from the relevant authority in the Mainland as to whether the Company is still the registered owner of the other part of the Land.  

(2)  The valuation report shows that, if the Company still owns the Land or part of it, it is a valuable asset.

(3)  As such, it would be in the interest of the creditors of the Company to further investigate the ownership of, and to recover if appropriate, the Assets.

15.The Plaintiff has also shown by evidence that:

(1)   If the above are correct, after discharging their encumbrances in the Mainland, the Land Use Right over the entire Land would still have a remaining value of approximately RMB300 million.

(2)   Under the 12 proofs of debt submitted by the creditors of the Company:

(a)   A total of approximately $2,200,000.00 is owed by the Company to creditors (collectively “the outside creditors”) other than the Plaintiff and Mr Chen.

(b)  Some $13,000,000.00 is owed by the Company to the Plaintiff and Mr Chen.

16.The Plaintiff proposes that, if the Company is restored, it would discharge the debts owed to all the outside creditors in the aggregate of not exceeding $2,200,000.00, subject to the adjudication by the liquidators and that the outside creditors assigning to the Plaintiff or its nominee all the debts owed to them by the Company. 

17.The Plaintiff also undertakes to pay all proper and reasonable expenses and remuneration of the liquidators to be appointed in the performance of their duties and responsibilities in relation to the winding up of the Company, if restored.

18.By his 2^nd affirmation, Mr Chen has explained that the Plaintiff only obtained the formal valuation report and the PRC legal opinion after the formal dissolution of the Company but not before when it was negotiating with the Official Receiver because it was under a “false sense of security” that the Official Receiver would apply to further extend the date of the dissolution of the Company to enable further discussion.  When it turned out that this was incorrect, it has promptly compiled the formal valuation report and the legal opinion to make the present application.

19.I have looked at the relevant correspondence presented to the Court by the Plaintiff and the Official Receiver over the relevant period of time.  I think it is clear that, with the materials then provided to him, the Official Receiver was not satisfied that the Company still owned the Land.  However, notwithstanding this, he might still be prepared to proceed with the investigation and the formal liquidation if the Plaintiff would undertake the necessary funding for the liquidation, including for appointing an outside experienced liquidator.  This was not clearly forthcoming at that time.  It was only on 30 April 2010, the date when the dissolution was to take effect, that the Plaintiff through its solicitors suggested to the Official Receiver that it would be prepared to fund the appointment of an outside liquidator to carry on the liquidation of the Company if certain conditions were fulfilled.  This obviously came too late.

20.I am however satisfied from the correspondence that the Plaintiff was probably thinking (without the fault on the part of the Official Receiver) that there was still time to further negotiate with the Official Receiver by obtaining a further extension of time for the dissolution of the Company, which did not happen.  

21.I therefore do not think there is anything in the circumstances to suggest bad faith in this application or that it is an abuse of process.

22.In light of the new evidence adduced in this application concerning the title ownership of the Land and the Land Use Right together with the valuation thereof, and the title ownership of the unsold villas, I am satisfied that:

(1)  The application is made within 2 years of the date of the Company’s dissolution as required under s. 290(1).

(2)  The Plaintiff being a 80% shareholder of the Company has an interest to make the application.

(3)  It is in the interest of the creditors and contributories of the Company including the Plaintiff that the dissolution of the Company be declared void under s. 290(1) of the Companies Ordinance, so that a liquidator can be appointed so as to deal with the potential interests in the Land and the villa

23.The Registrar of Companies has indicated that she would raise no objection to the application provided certain terms are included in the order to be made.

24.The Official Receiver, joined herein, has also informed the Court that he also has no objection to the application provided his costs incurred so far are paid by the Plaintiff.  The Plaintiff has agreed to that and its quantum as suggested by the Official Receiver.

25.In the premises, subject to the Plaintiff’s undertakings in the form set out in paragraphs 16 and 17 above, I would allow the application and make the following orders:

(1)   The dissolution of the Company is declared to have been void;

(2)   Kong Chi How, Johnson, a certified public accountant, and Lo Siu Ki, a certified public accountant, both of BDO Ltd are to be appointed as the joint and several liquidators of the Company;

(3)   A sealed copy of this Order shall be delivered to the Registrar of Companies for registration within 7 days form the date of the Order;

(4)   Upon delivery of a sealed copy of the Order to the Registrar of Companies, if the name of the Company is the same or, in the opinion of the Registrar of the Companies, too like a name appearing at that time in the index of company names maintained by the Registrar of Companies, the Plaintiff shall cause the Company to change its name within 30 days of the notice that may be issued by the Registrar of Companies directing the Company to change its name;

(5)   All outstanding liquidators’ statements, if any, shall be filed with the Registrar of Companies within 30 days from the date of this Order;

(6)   The Plaintiff shall pay the costs of the Official Receiver in the sum of HK$15,000.00 being the agreed costs and disbursements in lieu of taxation;

(7)   The Plaintiff shall pay the costs of the Registrar of Companies in the sum of HK$5,000.00 within 7 days from the date hereof, being the agreed costs and disbursements in lieu of taxation; and

(8)   There be no further order as to costs of this application.

Ms. Elizabeth Y. CHEUNG, instructed by Messrs Spencer Lee & Co., for the Plaintiff.

1^st Defendant, attendance excused.

2^nd Defendant, attendance excused.