Your World of Legal Intelligence
 Hong Kong | 1-800-335-6202

Chuan Wen Sze v Usine Co Ltd And Another

Judgment Cited authorities 1 Cited in Precedent Map Related
Vincent
Judgment Date11 December 1996
CourtHigh Court (Hong Kong)
Judgement NumberHCCW104/1990
Subject MatterCompanies Winding-up Proceedings
HCCW000104/1990 CHUAN WEN SZE v. USINE CO LTD AND ANOTHER

HCCW000104/1990

CWU No. 104 of 1990

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

-----------------

IN THE MATTER OF Section 117(1)(f) and Section 168A of the Companies Ordinance, Cap. 32, Laws of Hong Kong
and
IN THE MATTER OF Usine Company Limited

BETWEEN
CHUAN WEN SZE Petitioner
and
USINE COMPANY LIMITED 1st Respondent
BOON CHUAN HONG 2nd Respondent

AND

CWU No. 105 of 1990

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

-----------------

IN THE MATTER OF Section 117(1)(f) and Section 168A of the Companies Ordinance, Cap. 32, Laws of Hong Kong
and
IN THE MATTER OF Usine Garment Factory Limited

BETWEEN
CHUAN WEN SZE Petitioner
and
USINE COMPANY LIMITED 1st Respondent
BOON CHUAN HONG 2nd Respondent

-----------------

Coram: The Hon. Mr. Justice Rogers in Court

Dates of Hearing: 16th-20th, 23rd-26th, 30th September and 1st-4th, 7th-11th, 14th, 16th, 17th, 22nd October 1996

Date of Handing Down of Judgment: 11th December 1996

-----------------

JUDGMENT

-----------------

1. These are two petitions in which the Petitioner, Ms. Chuan Wen Sze seeks the winding up of two companies on the just and equitable ground and in the alternative, relief under Section 168A of the Ordinance, specifically an order that her shares in the two companies be purchased by the 2nd Respondent, Mr. Boon Chuan Hong.

2. These petitions have had a chequered history to say the least. They were launched in 1990. There was an aborted hearing in 1991. Further amendments had been made to the petitions since then. In addition to filing a great deal of further evidence, it can be said that both parties have significantly changed material parts of their cases. The delay since these petitions were first lodged and the changes in the material parts of the parties' evidence is in itself a matter which causes difficulty. That is only compounded by the fact that many of the events which are the subject of dispute took place 14 years ago or more.

3. As I will refer to later, the personal antagonism between the parties coupled with the length of time of preparation of this case seems to me to be a factor which has contributed to what I regard as "wishful" memory. I use that expression to indicate that perhaps when litigants have been thinking about events which took place sometime ago, they may have been inclined to remember those events in a light favourable to themselves. Unfortunately this is also made somewhat more difficult in circumstances where the witness involved is having to piece together what he regards must have happened in the light of such documentary evidence as is now available. I cannot leave these preliminary observations without reference to the fact that because of the close family connection between the Petitioner and the Respondent, the Action was unusually fraught. Specifically the Respondent, as referred to by his counsel and as he himself said in evidence, was seeking in part by these proceedings to justify his own conduct in the eyes of his children.

4. Because of the difficulties presented by the evidence in this case, the conclusions as to facts are based on the state of affairs which I have found the most likely given the evidence which has been presented and taking into account the respective parts of the witnesses' evidence which appeared to coincide with known undisputable facts and the most likely state of events.

THE FORMATION OF THE USINE BUSINESS

UCL

5. In 1979 the Petitioner, Ms. Chuan Wen Sze, formed the intention of running a business. From the start, it seems to have been the intention that the business would be concerned with very specific textiles, namely blouses of the type which are to be found in parts of Southern Germany and Austria. The Petitioner was acquainted with an importer in Southern Germany, namely Mr. Schliessman.

6. There appear to have been two businesses which the Petitioner started up. The first was an unincorporated business. The Petitioner first registered the name of Usine Company as a business name on the 26th April 1979. That was first registered as her own business but the registration was later changed to a partnership. The Petitioner herself kept the books. The books of the initial business and the later partnership are different but it is unnecessary to dwell on that.

7. At about the same time, Usine Company Limited, which is one of the two companies the subject of the petitions, was incorporated. The reason for the incorporation of Usine Company Limited (which will be referred to as 'UCL') was that Ms. Chuan had asked a Mr. Chau, who was her former employer, to contribute funds. It appears that Mr. Chau was only prepared to do so provided a limited company was formed. It was for that reason that the Petitioner did not use the Business Registration as the vehicle for the business into which Mr. Chau contributed funds. Altogether Mr. Chau contributed HK$300,000.00 to the funds of UCL. Shares were allotted in UCL in the ratio of 1,500 to Mr. Chau and 750 shares to each of Ms. Chuan and a Mr. Tsui. Those shares were allotted on the 11th of September 1979. It is not in dispute that Ms. Chuan and Mr. Tsui did not pay for their shares. It was never intended that Mr. Chau would be involved other than in contributing funds for UCL. Ms. Chuan had her connection with Mr. Schliessman and also her experience in the clothing business. It was always contemplated that the business would be run by Ms. Chuan with the assistance of, apparently, Mr. Tsui who was also experienced in the clothing business.

8. In the circumstances, I do not find it surprising that there would be a division of the shares in the ratio 50:25:25. Ms. Chuan and Mr. Tsui would be doing the work and bringing in the business whereas Mr. Chau would simply be providing finance. Whether the shares were regarded as a gift by Mr. Chau or more properly for consideration, whether strictly good or bad, does not seem to me to matter at this juncture. I approach it on the basis that those three persons were entitled to the shares which were allotted to them.

9. As I have indicated the business of UCL was set up on Ms. Chuan's initiative and run very much by her efforts. I have no doubt that it was the intention of those originally involved in UCL that Ms. Chuan should effectively run its business.

UC2

10. Soon after the incorporation and allotment of shares in UCL, Ms. Chuan seems to have been keen to commence a parallel business. For this purpose, she used the Business Registration of Usine Company. Her concept was to run it in parallel to UCL. The second business would be of a very similar nature to the first but confined to a specific customer or customers. For this new business further finance was needed and she approached Mr. Boon, the 2nd Respondent. Mr. Boon was married to the Petitioner's sister. Mr. Boon was a comparatively wealthy person to whom an investment of $200,000.00 was something which could be contemplated without any serious difficulty. According to the Petitioner, and I accept what she says, she made clear to Mr. Boon at the outset that there was another business namely UCL which was in existence and that the business of Usine Company into which Mr. Boon was being asked to invest would be run separately but parallel to it. The arrangement was that Usine Company would operate from the same premises as UCL.

11. Whether it was obvious to begin with is not clear but to a considerable extent, Usine Company benefited from UCL's payment of costs of running the business without contributing to them. I have to say that I was concerned about the propriety of these arrangements. Mr. Chau was, apparently, deliberately kept in the dark about the existence of Usine Company. Having listened to the Petitioner, however, I came to the conclusion that whereas on the face of it this arrangement would seem very odd and undesirable, there was in fact no intention to take an unfair advantage of UCL or Mr. Chau and his contribution. The Petitioner regarded it as necessary to keep the two businesses separate because otherwise she felt with the introduction of Mr. Boon and his contribution considerable difficulty would be caused in sorting out the respective parties' entitlements. Whereas this is an arrangement which in other circumstances I would have felt showed some impropriety, that conclusion is not one to which I feel it appropriate to come in the circumstances of this case.

12. The firm, Usine Company, which carried on business until 1982 was referred to during the trial as UC2, which is a name I adopt here for convenience. Again, as with UCL I have no doubt that it was the intention of all concerned that Ms. Chuan would be the key figure in the running of the UC2 business.

13. The original books of UC2 were exhibited in evidence. They were clearly neat and well maintained books. They have, however, a certain drawback to the extent that the Petitioner was not an accountant but had, quite obviously, some basic book-keeping knowledge. Nevertheless, the accounts, particularly of UC2 and indeed some of the other accounts which featured in this case, have been described unanimously by the accountants as convoluted. In a number of respects, one could see that the books had been drawn up in a manner which reflected the Petitioner's own concepts. It appears from the books of UC2 which have been kept by the Respondent that on the 9th August 1979, both herself and Mr. Tsui each contributed $5,000.00 by way of capital to UC2.

14. On the 16th October 1979, Mr. Boon paid the Petitioner $200,000.00 which was to be used in the business of UC2. Again this...

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT