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Active Base Ltd v Roderick John Sutton And Others

Judgment Cited authorities 32 Cited in Precedent Map Related
Vincent
Judgment Date04 June 2008
Subject MatterCompanies Winding-up Proceedings
Judgement NumberHCCW470/2005
CourtHigh Court (Hong Kong)
HCCW000470A/2005 ACTIVE BASE LTD v. RODERICK JOHN SUTTON AND OTHERS

HCCW 470/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 470 OF 2005

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IN THE MATTER of MOULIN GLOBAL EYECARE HOLDINGS LIMITED (“the Company”)
and
IN THE MATTER of the Companies Ordinance, Chapter 32

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BETWEEN
ACTIVE BASE LIMITED Applicant
and
RODERICK JOHN SUTTON and DESMOND CHUNG SENG CHIONG, JOINT AND SEVERAL LIQUIDATORS OF MOULIN GLOBAL EYECARE HOLDINGS LIMITED Respondents

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Before: Hon Kwan J in Chambers

Dates of Hearing: 9 to 11, 14 to 17, 21 and 22 April 2008

Date of Handing Down of Decision: 4 June 2008

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D E C I S I O N

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The summonses

1. I have before me two summonses issued by Active Base Limited (“Active Base”) on 26 January 2007 and 8 March 2007, pursuant to rule 95 of the Companies (Winding-up) Rules and section 200(5) of the Companies Ordinance, Cap. 32. Active Base seeks the following orders:

(1) the decisions of the liquidators of Moulin Global Eyecare Holdings Limited (“Moulin”; formerly known as Moulin International Holdings Limited) in rejecting the proof of debt lodged by Active Base on 21 June 2006 in the liquidation of Moulin for HK$76,500,780.82 (“the Proof of Debt”) and in rejecting the claim of Active Base as a secured creditor over the assets of Moulin by virtue of a debenture dated 6 May 2005 (“the Debenture”) be reversed;

(2) a declaration that a loan agreement dated 24 February 2005 made between Moulin and Active Base (“the Loan Agreement”) for a loan of HK$50 million is valid and enforceable against Moulin and the liquidators;

(3) a declaration that the Debenture made between Moulin and Active Base to secure repayment of the loan of HK$50 million and interest thereon is valid and enforceable against Moulin and the liquidators; and

(4) as an alternative to (3), the time for registration of the Debenture in the manner required by section 80 of Cap. 32 be extended to 7 June 2005 on the grounds that the omission to register was accidental, and/or due to inadvertence and/or is not of a nature to prejudice the position of creditors or shareholders of Moulin and/or it is just and equitable to grant such relief.

2. On 8 March 2007, I made directions that the summonses be tried with cross-examination of deponents of affirmations, as the accounts given by witnesses of Active Base and those of Moulin were irreconcilable and the conflicting versions cannot be resolved without cross-examination. I also gave leave to Moulin and the liquidators to discontinue proceedings in HCA No. 1083 of 2005 (“the High Court Action”) and ordered that the costs of those proceedings be in the cause of the aforesaid summonses of Active Base in the winding-up proceedings. The High Court Action was brought by Moulin against Active Base claiming declarations that the Loan Agreement and the Debenture are invalid and not enforceable against Moulin. Pleadings have been filed, and lists of documents and witness statements have been exchanged in the High Court Action. Subject to the attendance for cross-examination of all deponents and those who have made witness statements, I gave leave to Moulin and Active Base to adduce as evidence in the trial of the present summonses the documents disclosed and the witness statements filed in the High Court Action. Directions were also given for the filing of further affirmations in the summonses.

3. I will first set out the relevant background matters that are not controversial.

The Moulin Group

4. Moulin was incorporated in Bermuda on 18 May 1993 and was the ultimate parent company of the Moulin group of companies. It was a substantial multinational company engaged in the design, manufacture and sale of optical products. It had described itself as the largest optical group in Asia and one of the top three eyewear businesses in the world in terms of manufacturing capabilities and distribution strength.

5. Since October 1993, the shares of Moulin had been listed on the Main Board of The Stock Exchange of Hong Kong Limited (“HKEx”). Between February and May 2005, one-third of the shares of Moulin were held, directly or indirectly, by or for the benefit of members of the Ma family. At that time, the interest of the Ma family in Moulin was held principally through their private company, Sharp Merit International Limited (“Sharp Merit”).

6. As in February 2005, there were ten directors in Moulin, five of them being members of the Ma family and their names and positions were as follows: Ma Bo Kee (chairman, president, executive director), Ma Bo Fung (vice chairman, executive director), Ma Bo Lung (vice chairman, executive director), Ma Lit Kin Cary (chief executive officer, executive director; “Cary Ma”) and Ma Hon Kin Dennis (executive director; “Dennis Ma”). Ma Bo Kee, Ma Bo Fung and Ma Bo Lung are brothers. Cary Ma and Dennis Ma are sons of Ma Bo Kee. Ma Bo Lung and Dennis Ma were stationed at the Shanghai office of Moulin at the material time. The other five directors of Moulin were Tong Ka Wai Dicky (executive director; “Dicky Tong”), Joseph Aloysius Barrett (executive director), Chan Wing Wah Ivan (independent non-executive director; “Ivan Chan”), Ng Tai Chiu David (independent non-executive director; “David Ng”) and So Kwan Hon Danny (independent non-executive director; “Danny So”).

7. One of the major investments of Moulin was its acquisition of Eye Care Centers of America, Inc. (“ECCA”), the third largest operator of optical retail stores in the United States as measured by revenue. Sometime before December 2004, Moulin entered into an agreement to acquire 56% interest in ECCA. The transaction was signed in partnership with Golden Gate Capital, a San Francisco based private equity firm, which would own approximately 43% of ECCA. Under the agreement, Moulin and Golden Gate Capital would purchase ECCA from the vendor at a total consideration of US$450 million. The ultimate acquisition cost amounted to US$489 million and the purchase was completed on 1 March 2005. It was in the public knowledge that the acquisition was due to be completed in the first quarter of 2005.

8. Of the total consideration, US$149.7 million was financed by senior subordinated loans and US$165 million was financed by a senior credit facility arranged by JP Morgan Chase Bank N.A., which was secured on substantially all of ECCA’s assets. The balance of the cost in the aggregate of US$171 million was required to be contributed by Golden Gate Capital and Moulin (through Ample Faith Investments Limited, an indirect wholly-owned subsidiary of Moulin; “Ample Faith”). Between them, Moulin through Ample Faith was required to inject US$97.4 million in the form of equity contribution (US$73.4 million) and pro rata contribution to transaction cost (US$24 million).

9. On 21 June 2005, a creditor’s petition was presented to wind up Moulin. Provisional liquidators were appointed on 23 June 2005. The winding-up order was made on 5 June 2006.

10. Throughout the period from 31 December 2004 to the date of the winding-up order, Moulin was insolvent. The provisional liquidators had prepared an estimated balance sheet as at 31 December 2004 with a net liability position of HK$2.75 billion. According to the present estimate of the liquidators, the likely shortfall between the amount owed to creditors by Moulin and the amount paid to creditors by way of dividend in the winding-up proceedings would be in excess of HK$2.36 billion.

Active Base

11. Active Base was incorporated in Hong Kong on 23 February 2000. It is a licensed money lender and its principal activity is the provision of loan financing. It is a wholly owned subsidiary of Tomorrow International Holdings Limited (“Tomorrow”). The shares of Tomorrow are listed on HKEx. Chan Yuen Ming also known as George Chan or George Chen is the major shareholder of Tomorrow, holding 61.5% of its shares through a company beneficially owned by him. Chan Yuen Ming has never been a director of Tomorrow or Active Base.

12. At the material time in 2005, the directors of Active Base were Yau Tak Wah Paul, Louie Mei Po Yvonne (“Yvonne Louie”), Wong Shin Ling Irene (“Irene Wong”), and Tam Wing Kin. All of them were also executive directors of Tomorrow. Of the four directors of Active Base, Yvonne Louie and Irene Wong were primarily responsible for its lending activities. Yvonne Louie was responsible for negotiating terms with the borrowers. After the board of directors had made a decision on the loan, Irene Wong would be responsible for the execution.

13. In 2005, Yvonne Louie and Irene Wong had been engaged in the money lending business for ten years. Prior to working for Active Base, they had both served as executive directors of D C Finance (Holdings) Limited (“D C Finance”; now known as SMI Corporation Limited). Some of the subsidiaries of D C Finance, including Cornhill Development Limited (“Cornhill”), were engaged in money lending activities.

14. Apart from Tomorrow and D C Finance, by 2005, Yvonne Louie and Irene Wong had been directors of two other listed companies, being Swank International Manufacturing Company Limited (“Swank”) and Singapore Hong Kong Properties Investment Limited (now known as Landune International Limited). Tomorrow acquired an interest in Swank in 2001 and disposed of it in June 2005. Swank was in the business of the design, manufacture and sale of optical products, the same field of business as Moulin. Chan Yuen Ming and his relatives was the controlling shareholder of all four listed companies during the time Yvonne Louie and Irene Wong served as executive directors in...

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