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Re The Amery China Building Co Ltd

Judgment Cited authorities 6 Cited in Precedent Map Related
Vincent
Judgment Date03 April 1982
Year1982
Judgement NumberHCCW8/1982
Subject MatterCompanies Winding-up Proceedings
CourtHigh Court (Hong Kong)
HCCW000008/1982 RE THE AMERY CHINA BUILDING CO LTD

HCCW000008/1982

Petition for a compulsory winding-up - Guidance as summed up by Upjohn L.J. in In re P. & J. Macrae followed -

Held : (1) the wish of an opposing creditor is not excluded only by reason of his minority in value and
(2) regard must be had to all material considerations including each faction's interest in its own context and proper perspective against the given background.

IN THE HIGH COURT OF JUSTICE Comapnies Winding-Up
No. 8 of 1982

IN THE MATTER of the Companies Ordinance, Cap. 32

and

IN THE MATTER of the Amery China Building Company Limited.

____________

Coram: Hon. LIU, J. in Court

Date: 3 April 1982

___________

JUDGMENT

___________

1. This is a petition by a judgment creditor to wind up the Amery China Building Company Limited (hereinafter referred to as "the company"). The judgment debt is in the sum of $2,000,000 which carries interest at the rate of 15% per annum from the 25th March, 1981, being the date on which an action was commenced by the petitioner against the company intituled High Court Action No.1936 of 1981. On the 9th June 1981, judgment was by consent entered against the company with a stay of execution for eight weeks thereafter. Execution on the judgment debt was levied on the 1st September 1981, and a nil return was made. The said judgment had remained wholly unsatisfied. Hence this petition for winding up the company was presented on the 20th January 1982.

2. The petition was opposed by the company and its Managing Director in both his dual capacity of as well a contributory of 225,000 paid-up shares as an alleged creditor in the sum of $764,155.60 plus a further loan of $200,000.

3. The company was incorporated in April 1980, with a $6,000,000 paid-up capital, and soon after its formation a contract to build 75 units in two stages in the Lai Chee Bay area of Canton was signed with the Chinese District Authority in mid May 1980. The projection prepared by the company forecast proceeds of sale for the first stage units to reach $90M, of which about $28.5M would represent net profit. It was claimed that under the contract with the Chinese District Authority, upon importation of construction machinery onto the building site, the company would be entitled to sell its share of the first stage units in advance. The Court was told that site formation had been completed at the cost of $2.1M and that deposits to the extent of $2.3M were paid for "materials" which was corrected to "machinery". This development project was said to have been delayed for a year and a half by the sheer weight of its enormous and involved undertaking. Whilst it was deposed to by the Managing Director of the company in its defence of the petitioner's application for summary judgment in the said High Court Action that the company was expressly authorized under contract then to sell units in stage one, he has since affirmed in these proceedings that the company was not so entitled before the introduction of construction machines to the building site. It was finally alleged by the company through its Managing Director that as soon as piling machinery was delivered to and piling work commenced on the site, units could be marketted. These prevarications aside, it was delay in progress and the opportunity to sell that allegedly led the company into insolvency.

4. The company and its Managing Director in his said dual capacity offered little real opposition on the merits, but it was urged on behalf of the company that the circumstances truly warranted sixmonths' grace. Much play was made of the assertions that there were on assets available for the benefit of the creditors and that the investments represented by the $2.1M spent on site formation and the $2.3M deposits made on materials/machinery would be wholly irretrievable in a compulsory winding-up. It was emphasized that the company was about to overcome all its obstacles in Lai Chee Bay and that its Managing Director only returned from a Canton discussion on the 18th February 1982. It was alleged by the company's Managing Director that he was informed by one Mr. Lo Siu Lam, an officer of the Chinese District Authority that permission would be forthcoming from higher authorities for importing construction machinery to the Lai Chee Bay area. It was further disclosed that the same contractor for site formation had been retained as the piling contractor who would in due course supply the requisite machinery and equipment. Thus it was submitted that the prospects of the company weathering the storm were reasonably good and that an immediate order for winding up would bring about nothing short of a total disaster and irreversible loss to all without exception.

5. On all this, counsel pivoted his application for a six months' adjournment, and on instructions he offered the following undertakings:

1. The company and its Managing Director, Mr. Chan Hak Kong jointly and severally undertake to pay the judgment debts to the petitioner's solicitors within two months of the date of commencement of work on the Lai Chee Bay building site.

2. The company and Mr. Chan jointly and severally undertake to notify the petitioner's solicitors immediately upon the sale of any Lai Chee Bay area units in Hong Kong.

3. The company and Mr. Chan jointly and severally undertake to pay all proceeds of sale from these units in Hong Kong to the petitioner's solicitors up to the amount of the said judgment debts.

6. The company was willing to submit to further undertakings in terms akin to those given in In re St. Thomas' Dock Company, (1) that is to say, "first of all, not to consent to a winding-up order on the petition of any other creditor, or to a voluntary winding-up; secondly, to give notice to the petitioner of the presentation of any other petition for a winding-up; and, thirdly, to consent that on the presentation of any such other petition the present application may be renewed notwithstanding the suspension, so that the Court may be able to deal with it as if no suspension had been made.

7. During the course of the submissions, in fact after the close of the address of counsel for the petitioner, attention was drawn to the receipt of $3.3M for share capital revealed in the particulars contained in a tentative Balance Sheet of the company as at the 30th October 1981 known as "Trial Balance". Thus, it would appear that of the $6M alleged paid-up capital or capital credited as paid-up, $2.7M was unaccounted for. This missing $2.7M was sought to be explained in a further affirmation of the Managing Director of the company filed shortly before the resumed hearing. It transpired that one of the former shareholders/directors, Mr. Yeung Ngan Foo, with an allotment of 270,000 shares at $10 each had allegedly defaulted on his calls and that the shares so allotted to him had been forfeited. However, Mr. Yeung remained indebted to the company in the full sum of $2.7M. It was the belief of the Managing Director of the company that Mr. Yeung was not a worthly target of litigation. In counteracting the turn of events, counsel for the company and its Managing Director opposing in his said dual capacity spared no time in offering further undertakings, namely:-

1.

The company undertakes to commence proceedings forthwith against Mr. Yeung Ngan Foo for the recovery of the $2.7M and to prosecute the action diligently.

2. Mr. Chan undertakes to provide a further loan to the company for financing these proposed proceedings against the said Mr. Yeung.

3. The company and Mr. Chan jointly and severally undertake to keep the petitioner's solicitors informed of each step taken in the proposed action against the said Mr. Yeung so as to enable the petitioner, if dissatisfied with the progress, to apply for a revocation of the suspension and proceed with the present petition.

8. In the two cases cited, where the wishes of a mass of opposing creditors were acceded to for granting a six months' adjournment on a petition to compulsorily wind up a company, the future prospects of the company were not beyond salvation after an initially luckless set-back. One of the companies in these cases was virtually beginning to show profit, and other ancillary conditions were also favourable. I do not propose to descend more into the facts of these two cases, In re St. Thomas' Dock Company (1) and In re Great Western (Forest of Dean) Coal Consumers' Company(2).

9. It is trite law that the absence of assets is not by itself a sufficient ground for refusing a winding-up order (vide s. 180 Companies Ordinance) and that other matters including the wishes of the creditors and contributories - the latter of which would obviously attract less weight and generally become material only "if the debts are not likely to exhaust the assets" - must all be taken into account (vide s.287 Companies Ordinance and 31-41 Gore-Browne on Companies, 43rd edition). It was common ground that the petitioning creditor was prima facie entitled to, as between itself and the debtor company, a winding-up order, an entitlement frequently referred to as a right ex debito justitiae. However, it was submitted on behalf of the petitioner that other circumstances aside, the wishes of the other creditors could be ignored in a creditor's petition unless they represented the majority and were well supported by valid reasons. In other words, it was contended that however valid were the reasons for the opposition, the order sought could not be withheld at the instance of opposing creditors in minority. Leaving briefly this contrasting view, it was the consensus that a petitioning creditor even in...

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