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HCCW 229/2019
[2020] HKCFI 2215
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
COMPANIES (WINDING-UP) PROCEEDINGS NO 229 OF 2019
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IN THE MATTER of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32) |
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and |
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IN THE MATTER of Minloy Limited, Top Master Development Limited and Wealth Island International Limited |
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| Before: |
Hon Linda Chan J in Chambers |
| Date of Hearing: |
11 August 2020 |
| Date of Decision: |
28 August 2020 |
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D E C I S I O N
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1. By a petition presented on 26 July 2019 (“Petition”) the petitioner, Kwok Hon Ming Dennis (“Petitioner”), seeks a winding up order against 3 companies namely, Minloy Limited (“Minloy”), Top Master Development Limited (“Top Master”) and Wealth Island International Limited (“Wealth Island”) (collectively “Companies”) under section 177(1)(d) of the Companies (Winding-up and Miscellaneous Provisions) Ordinance (Cap 32) (“Ordinance”) on the ground that they are insolvent and unable to pay their debts.
2. There are 2 summonses before the Court both issued by the Companies:
(1) The summons dated 2 September 2019 for a validation order in respect of a proposed sale of certain “non-core” land owned by Minloy, and to apply the proceeds to pay its costs and expenses and the costs of the Companies in these proceedings (“Validation Summons”).
(2) The summons dated 18 September 2019 to strike out the Petition on the grounds that it constitutes an abuse of process of the Court and that section E of the Petition is “scandalous, frivolous or vexatious” (“Strike out Summons”).
A. Preliminary matter
3. Although no point has been taken by Mr Victor Joffe (appearing with Mr Justin Ho), counsel for the Companies, it seems to me that the Petition, insofar as it seeks a winding-up order in respect of the Companies, is irregular[1]. I am not aware of any precedent (none has been cited by the Petitioner) where a petitioner can present one winding up petition in respect of 3 companies and ask the Court to make a winding-up order against such companies.
4. This is unsurprising, given that each company is a separate legal entity with different assets and liabilities. In considering whether a company should be wound up, the Court has to consider the financial position of that company, and the views of the creditors of that company. It is a misconception to think that the Companies can be considered as a whole, whether for the purpose of seeking a winding-up order from the Court or in administering their affairs after they have gone into liquidation. The latter has been explained as a principle against intromissions, which prohibits a liquidator seeking to charge the expense of one liquidation against the assets in another liquidation, even when the first liquidation is undertaken with a view to securing a benefit for the creditors in the second liquidation (Re Zhu Kuan (Hong Kong) Company Ltd [2007] 4 HKLRD 1, at §§30-31, per Kwan J (as she then was)).
5. That a petitioner shall present a winding up petition in respect of each company is also reflected in the Companies (Winding-up) Rules (Cap 32H), which envisage a separate and distinct winding up proceeding being commenced in respect of each company to which it relates. See, in particular, rules 3(1), 9(1)-(2), 22 and Forms 2 and 3 in the Appendix.
6. Indeed, when questions by this Court as to how the Petitioner can present one petition in respect of 3 companies, Mr Lai Chun Ho, counsel for the Petitioner, informs the Court that a requisition has already been raised by the Master in this respect, which remains unanswered. This is despite the fact that the Petition was presented more than a year ago.
7. As matter now stands, the Petitioner has not indicated whether he intends to rectify the irregularity or how he goes about dealing with it. However, as Mr Joffe considers that this is a “technicality” to which the Companies do not take any issue at this stage, I will proceed to consider the applications on the basis of the matters pleaded in the Petition and the arguments put forward by counsel.
B. Background fact
8. The parties have been embroiled in litigations since 2013. The following fact is taken from the Judgment in CACV 9, 74 and 169/2017 dated 24 April 2019 (“CA Judgment”), which were appeals against the Judgment of Deputy High Court Judge Ismail SC given in relation to 3 “unfair prejudice” petitions presented by the Petitioner in respect of the Companies under section 168A of the former Companies Ordinance (Cap 32), seeking orders that his shares be bought out by the “Majority Shareholders” (as defined in §9(2) below) (“UP Proceedings”).
9. The parties’ shareholdings were (and still are) the same in respect of the Companies. They were divided into 2 camps:
(1) The Petitioner (through his nominees) held 10.714%. Helen Law, against whom no allegation was made and no relief was sought, held (through her nominee) 17.857%.
(2) Albert Poon held 21.429%, Irene Tsang/Asian Adventure Ltd (her corporate vehicle) held 35.714%, Enchantment Properties Ltd (corporate vehicle of Norris Yang) held 7.143% and China Funds Development Ltd (corporate vehicle of William Lo) held 7.143% (collectively “Majority Shareholders”)[2].
10. In 1991, the Petitioner and Helen Law identified an opportunity to acquire 900,000sf of land on Lantau Island at HK$7 million. They identified the Majority Shareholders as co-investors and, together, entered into an undated agreement in January 1992 to set out the terms of their investment (“Shareholders Agreement”). Although the Shareholders Agreement only referred to Minloy, it was accepted by all shareholders that the Shareholders Agreement governed the relationship of the investors in respect of the Companies[3].
11. The Shareholders Agreement provides, inter alia, that[4]:
(1) HK$7 million is to be funded by paid-up capital as to HK$70,000 (1%) and shareholders’ loans as to HK$6,930,000 (99%) (“Loans”), which shall be advanced by the shareholders in proportion to their shareholdings. The Loans bear interest at 2% per month compounded monthly (clause 2);
(2) the objective of the project is (i) in the short term, to allow shareholders to recoup their initial investment with interest on the Loans through the sale of “non-core” land; (ii) in the medium term, to provide land for shareholders to enjoy as recreational facility; and (iii) in the long term, to realise the appreciation in land value (clause 3);
(3) all shareholders agree to appoint Irene Tsang, Helen Law and the Petitioner as managers responsible for liaising and monitoring the progress of all relevant matters. When the cumulative cash receipts from sale of land/assets reach HK$7 million, the managers are entitled to receive a bonus of 15% (to be shared equally) on perpetual basis of any future cash receipt from sale of land/assets (clause 4);
(4) the managers will use their best effort to dispose of the “non-core” land as soon as possible, with the aim of allowing the shareholders to recoup their investment and interest thereon in full. When an “outside buyer” submits an offer, the shareholders will have to approve the sale first and had the first option to match the offer (clause 6);
(5) the shareholders agree to pay 5% commission to any agent for successful sale of land to any external buyer (clause 7); and
(6) shareholders’ approval is required for, inter alia, (i) sale of any land asset, (ii) raising debt, (iii) payment of principal and interest of Loans. Before the Loans are fully repaid with interest, the above decisions require 100% agreement amongst shareholders. After HK$7 million has been recouped from land sale, a 60% vote is sufficient to approve any decisions (clause 8).
12. In September 1997, there were 2 offers to purchase part of the “non-core” land for HK$17.3 million, which were not approved by the Majority Shareholders. In November 1997, there was a further offer to purchase a larger part of the “non-core” land for HK$27 million, which was also not approved by the Majority Shareholders. Thereafter, in early 2008, the shareholders had disagreement over whether to accept the compensation offered by the Government in respect of certain land held by Top Master, which was eventually paid to Top Master following a board resolution passed by the Petitioner and Helen Law (qua directors) to accept the same. The Petitioner and Helen Law were removed as managers and directors by a resolution passed by the Majority Shareholders at the EGM held on 7 April 2008[5]. Top Master was unable to distribute the compensation proceeds to the shareholders owing to the objection of the Majority Shareholders[6]. This was followed by Albert Poon making a complaint to the police against the Petitioner for theft from Top Master of the amount he used to purchase cashier orders for distribution to the shareholders, which came to an end after investigation by the police[7].
13. From mid-2008 onwards, the 2 camps of shareholders reached an impasse and unable to work together in relation to the Companies affairs. In the second half of 2012, the Petitioner pressed for compensation for his removal as manager, followed by his request that the Majority Shareholders buy out his shares and arrange for repayment of his share of the Loans. On 20 June 2013, the Petitioner commenced the UP Proceedings[8]. In his petitions, the Petitioner...
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