Case Document

100%Judiciary

HCB 4005/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 4005 OF 2012

____________

	IN THE MATTER of CHUNG WINSTON (鍾馨稼) formerly known as CHUNG HING KA, a bankrupt (No 4005 of 2012)
	and
	IN THE MATTER of the property known as All Those 547 equal undivided 109,000^th parts or shares of and in All That piece or parcel of land registered in the Land Registry as Tai Po Town Lot No 161 (House No 102 and Six Car Parking Spaces, Boulevard Du Palais, The Beverly Hills, No 23 Sam Mun Tsai Road, Tai Po, New Territories, Hong Kong)
	and
	IN THE MATTER of all the shares of GREAT CHINA SUPREME ASSET MANAGEMENT CO, LIMITED
	and
	IN THE MATTER of WINSTON GLOBAL ENERGY LIMITED
	and
	IN THE MATTER of sections 20 and 20A(1)(a)(ii) of the High Court Ordinance, Cap 4 and Order 50, rule 4 of the Rules of the High Court, Cap 4A
	and
	IN THE MATTER of section 25A of the High Court Ordinance and Order 45, rule 8 of the Rules of the High Court, Cap 4A

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BETWEEN
	YU TAI YEE BERYL	Applicants
	CHOI TZE KIT SAMMY
and
	WINSTON GLOBAL ENERGY LIMITED	1st Respondent
	GREAT CHINA SUPREME ASSET MANAGEMENT CO, LIMITED	2nd Respondent
	HUANG BIN	3rd Respondent
____________

Before: Hon Au-Yeung J in Chambers

Date of Hearing: 28 January 2015

Date of Decision: 29 January 2015

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D E C I S I O N

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The application

1.By re-amended summons (“the summons”), the applicants (“the trustees”) apply for declarations that Mr Winston Chung (“the bankrupt”) is the beneficial owner of a property and shares in 2 companies and hence form part of his estate.

2.Only Winston Global Energy Ltd (“R1”) is represented by lawyers and appeared at this hearing. However, Mr Chow, counsel acting for R1 confirmed that his solicitors have applied to cease to act and he had received no instructions to contest the summons.

3.I am satisfied from the 2^nd affirmation of Leung Ni Shun and 5^th affirmation of Christine Chan as to service of the summons, affidavits and notice of hearing on Great China Supreme Asset Management Co Ltd (“R2”) and the 3^rd respondent (“Huang Bin”) and the bankrupt and am content to proceed in their absence.

4.The bankrupt used to reside at the subject property, namely, House No 102 and 6 car parking spaces, Boulevard Du Palais, the Beverly Hills, No 23 Sam Mun Tsai Road, Tai Po, New Territories, Hong Kong (“the property”). The property is held in the name of R1. The sale and purchase agreement and assignment in relation to the property were signed by the bankrupt as sole director of R1, the purchaser.

5.The bankrupt used to hold 100 shares (100%) in R1, a BVI company, until 28 September 2011 when he transferred all the shares to R2, another BVI company. As a result, R1 is wholly owned by R2. Since 27 February 2012, Huang Bin has been the sole director of R1.

6.On 28 September 2011, the bankrupt became the sole shareholder and director of R2.

7.On 11 April 2012, the bankrupt transferred all his shares in R2 to Huang Bin. By a declaration of trust of the same date, Huang Bin declared herself to be holding the shares in R2 as trustee for the bankrupt. In short, R2 is beneficially owned by the bankrupt.

8.Since 25 February 2013, Huang Bin has been the sole director of R2.

9.An order for bankruptcy was made against the bankrupt on 27 February 2013.

10.On 29 May 2013, the trustees took out the summons. There was then no respondent to it. The summons was later amended on 24 July 2013 to join in R1.

11.On 30 August 2013, the trustees obtained an interlocutory injunction, ex parte, restraining R1 from disposing of the property.

12.Huang Bin filed an affirmation in opposition to the interlocutory injunction on behalf of R1 stating that the trustees were bound to lose because the property was owned by R1 and not the bankrupt. She admitted that she was the trustee holding the shares in R2 on behalf of the bankrupt pursuant to a declaration of trust.

13.The summons was thus further amended to join in R2 and R3, to complete the chain of ownership of the property.

14.The chain of ownership has been admitted by both the bankrupt and Huang Bin:

(a) In his proposal for voluntary arrangement (“the IVA proposal”), the bankrupt confirmed that the property was one of his assets.

(b) In the list of assets appended to the IVA proposal, the bankrupt confirmed that he was the beneficial owner of R2, R1 and the property. He also confirmed that Huang Bin was his trustee.

(c) In her affirmation, Huang Bin admitted that she is holding the shares in R2 on trust for the bankrupt.

15.Apart from the affirmation referred to in paragraph 11 above, none of the respondents have filed any evidence in opposition to the summons.

Findings

16.It is clear that on all documents and admissions on the part of the bankrupt and Huang Bin that the bankrupt is irrefutably the ultimate beneficial owner of the property. R1 and R2 are but his corporate nominees. There is no evidence to show that R2 provided any consideration for the transfer of R1’s shares by the bankrupt to R2.

17.In the premises, I am satisfied on the balance of probabilities that the bankrupt is the ultimate beneficial owner of the property, R1 and R2 and there is no ground in opposition put forth.

Terms of the order

18.The trustees invite this court to make an order declaring that the property is beneficially owned by the bankrupt and forms part of his estate and that R1 shall transfer the legal title of the property to the trustee within 7 days.

19.I do not think these are proper orders to make as a shareholder (in this case R2) has no legal or equitable interest in a company (in this case R1). That was why the respondents were joined in the first place.

20.In Oriental Peer Co Ltd v Terrian Ltd [1987] 2 HKC 61 (CA), at 72D-G, it is said that,

“… Terrian, as a shareholder of Polly Jack, has no legal or equitable interest whatsoever in the property (if any) of that company.

This is trite law but it is too often overlooked and, as Lord Russell of Killowen observed in EBM Co Ltd v Dominion Bank [1937] 3 All ER 555 (PC) at p 564 it is ‘of supreme importance that the distinction should be clearly marked, observed and maintained between an incorporated company's legal entity and its actions, assets, rights and liabilities on the one hand, and the individual shareholders and their actions, assets, rights and liabilities on the other hand.’

As the English Court of Appeal emphasized in Prudential Assurance Co Ltd v Newman Industries (No 2) Ltd [1982] Ch 204, 223A-B, shares are merely a right of participation in the company on the terms of the articles of association. The same point was made by Lord Buckmaster in Macaura v Northern Assurance Co Ltd [1925] AC 619, 626 where he indicated that the shareholder has no right to any item of the company's property, but is entitled to a share in the profits while the company continues to carry on business and a share in the distribution of the surplus assets when the company is wound up.” (emphasis added)

21.If a shareholder were to be able to acquire direct beneficial ownership to the underlying assets, it would be wholly unfair to the creditors (eg in this case the mortgagee) of the relevant company.

22.The proper order, in my view, would be to transfer the shares in R2 held by Huang Bin to the trustees as those shares form part of the estate of the bankrupt. Once that is done, the trustees can, as shareholders, eg exercise their powers as shareholders of R1 and participate in the rights in R1, or resolve to wind up R1 and sell the property.

23.Accordingly, I order as follows:

(1) It is declared that all the shares in the 2^nd respondent are beneficially owned by the bankrupt and they form part of the estate of the bankrupt vested in the trustees under sections 58(1) and (2) of the Bankruptcy Ordinance, Cap 6.

(2) The 3^rd respondent shall within 7 days hereof execute an instrument of transfer of all the shares in the 2^nd respondent to the trustees, failing which Ho Hing Chung of Howell & Co, solicitors for the trustees, be empowered to sign the instruments of transfer and all such documents and forms, and issue such notices, on behalf of the 3^rd respondent for the purpose of transferring the relevant shares in the 2^nd respondent to the trustees.

(3) The 3^rd Respondent shall within 7 days hereof deliver up all relevant share certificates and all books, accounts and all other documents belonging to the 2^nd respondent to the trustees.

(4) The 3^rd Respondent shall within 7 days hereof deliver up all relevant share certificates and all books, accounts and all other documents belonging to the 1^st respondent to the trustees.

24.The trustees are entitled to their costs of this application, save for the costs of and incidental to the 1^st amendment to the summons. This is because the application would have failed without the 1^st amendment to join in R1. The costs of the application should also include costs reserved in relation to the obtaining of the interlocutory injunction against disposal of the property.

25.I have considered the costs statement in respect of the summons and the injunction. I am of the view that this matter is not complicated. There is no justification for 2 fee earners or a rate higher than the usual $4,000 for a solicitor of over 10 years’ post qualification experience. I summarily assess such costs at $280,000 for the summons including the injunction. The costs order in paragraphs 24 and 25 are made on a nisi basis, which can be varied within 14 days by summons.

26.I thank Mr Chong and Mr Chow for their assistance.