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The Joint And Several Liquidators Of Faith Dee Ltd v Yip Shu Chee And Others

Judgment Cited authorities 6 Cited in Precedent Map Related
Vincent
Judgment Date05 February 2013
Subject MatterCompanies Winding-up Proceedings
Judgement NumberHCCW237/2005
CourtHigh Court (Hong Kong)
HCCW237B/2005 THE JOINT AND SEVERAL LIQUIDATORS OF FAITH DEE LTD v. YIP SHU CHEE AND OTHERS

HCCW 237/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 237 OF 2005

_________________________

IN THE MATTER OF Faith Dee Limited (the “Company”)

and

IN THE MATTER of Section 266B of the Companies Ordinance, Chapter 32 of the Laws of Hong Kong

_________________________

BETWEEN

THE JOINT AND SEVERAL LIQUIDATORS OF FAITH DEE LIMITED Applicant
and
YIP SHU CHEE 1st Respondent
UNITED FOCUS LIMITED
NEW TARGET CONSULTANTS LIMITED		 2nd Respondent
3rd Respondent

_________________________

Before : Deputy High Court Judge Marlene Ng in Chambers
Date of Hearing: 23 January 2013
Date of Handing Down Decision : 5 February 2013

_____________

DECISION

_____________

I. APPLICATIONS

1. Faith Dee Limited (“Company”) was incorporated on 28 July 1989 under the Companies Ordinance Cap 32 (“CO”). A winding up order was made on 27 June 2005. The current liquidators of the Company are Mr Kong Chi How Johnson and Mr Lo Siu Ki of BDO Limited (“Liquidators”).

2. On 7 June 2012, the Liquidators issued a summons against the 1st respondent Mr Yip Shu Chee (“Mr Yip”) under section 266B of the CO (“S 266 Summons”), which summons was amended on 18 June 2010 (“Amended S 266B Summons”) to seek the following reliefs:

(a) a declaration that the disposal of Office A on the 10th floor (“Office 10A”) and Office B on the 16th floor (“Office 16B”) of Yun Kei Commercial Building, No 682 Shanghai Street, Kowloon (“Building”) to the 2nd respondent United Focus Limited (“United Focus”), Office B on the 10th floor (“Office 10B”) of the Building to Mr Yip, and Office C on the 10th floor (“Office 10C”) of the Building to the 3rd respondent New Target Consultants Limited (“New Target”) are unfair preference transactions and void under section 266B of the CO, and an order that such properties (“New Target Properties”) be vested in the Liquidators (“Properties Claim”);

(b) a declaration that all payments made by the Company in favour of Mr Yip between 26 February 2005 and 7 March 2005 are unfair preference transactions and void under section 266B of the CO, and an order that Mr Yip do repay the total sum of HK$1,931,000.00 plus interest thereon at judgment rate to the Company (“Payments Claim”).

The orders (and not the declarations) sought under the Properties and Payments Claims are “and/or alternatively” reliefs.

3. On 12 June 2012, Mr Yip issued a striking out summons (“Strike Out Summons”), which was amended on 22 January 2013 to become a summons by Mr Yip, United Focus and New Target (“Respondents”) to strike out the Amended S 266 Summons and to dismiss the Liquidators’ claims for disclosing no reasonable cause of action or as being frivolous or vexatious or an abuse of the process of the court on the ground that they set up causes of action that are time-barred under section 4(3) of the Limitation Ordinance Cap 347 (“LO”) at the time when the S 266B Summons was filed (“Amended Strike Out Summons”).

4. Before discussing the merits of the Amended S 266B Summons and the Amended Strike Out Summons, it is necessary to set out the relevant background facts.

II. BACKGROUND

5. The Liquidators claim that the Company was set up as a property holding vehicle for inter alia Mr Yip (a director of the Company) and his brother Mr Ip Kam Chi (“Mr Yip’s Brother”). Mr Yip was a director and shareholder of the Company. Mr Yip claims that he emigrated to North America since 1983 and was therefore not active in the management of the Company’s affairs for a long time, and that he only got involved when he returned to Hong Kong at the end of 2004.

6. Mr Yip is a director of United Focus, and the only shareholders are Mr Yip and New Target each holding 1 share. Mr Yip is also a director of New Target, and the only shareholders are Mr Yip (99%) and United Focus (1%). Mr Yip’s Brother was a director of Set Phone Limited.

7. On 17 August 1996, the Company charged the 1st floor, Office C on the 7th floor, Offices A-C on the 9th floor, Offices A and C on the 16th floor, and Offices A-C on the 17th floor of the Building (collectively, “Set Phone Properties”) to Wing Lung Bank Limited (“Petitioner”) to secure a bank loan in favour of Set Phone Limited. As a result of default in repayment of such bank loan by Set Phone Limited, the Petitioner commenced HCMP 7593/1999 against the Company and Set Phone Limited to recover a sum of HK$14,671,650.75 with interest (“Debt”) and to demand delivery up of vacant possession of the Set Phone Properties. On 23 February 2000, the Petitioner obtained a money and possession order in its favour (“Order”). Subsequently, the Petitioner took possession of and sold the Set Phone Properties to partially settle the Debt, but there was still a shortfall outstanding and due from the Company and Set Phone Limited.

8. On 29 August 1996, the Company charged the New Target Properties that were registered in its name to the Petitioner to secure a bank loan in the sum of HK$4,500,000.00 in favour of New Target. Mr Yip claims (but the Liquidators dispute) that the New Target Properties were beneficially owned by him. On 28 December 2004, the bank loan to New Target was repaid to the Petitioner in full. Mr Yip claims he paid a sum of HK$2,695,230.70 (“Discharge Sum”) to the Petitioner for such purpose. On 21 January 2005, the Petitioner discharged the mortgage in respect of the New Target Properties. Apart from having paid the Discharge Sum Mr Yip has not adduced any affirmation evidence to support the assertion that he beneficially owned the New Target Properties.

9. The Company subsequently disposed of the redeemed New Target Properties as follows:

Property Purchaser Consideration (HK$) Date of agreement
for sale and
purchase		 Date of
assignment

Office 10A
United Focus
480,000.00
22/2/05
24/2/05

Office 10B
Mr Yip
470,000.00
22/2/05
24/2/05

Office 10C
New Target
515,000.00
22/2/05
24/2/05

Office 16B
United Focus
475,000.00
2/3/05
4/3/05

Total:
1,940,000.00

10. In February/March 2005 (ie within a period of 6 months prior to the commencement of the winding up of the Company), the Company made the following payments to Mr Yip by cheques drawn on the Company’s bank account with the Bank of America (“BA Account”) that were made payable to him and signed by him as authorised signatory (“Payments”):


Date
Cheque no.
Amount (HK$)

26/2/05
00006
1,500,000.00

4/3/05
00007
161,000.00

7/3/05
00009
270,000.00

Total:
1,931,000.00

11. Apart from the outstanding balance of the Debt owed to the Petitioner, the Company was also indebted to other creditors in the total sum of HK$871,445.00 (as shown on p 12 of the Company’s audited accounts for the period from 1 November 2003 to 31 May 2005 (“Accounts”)).

12. On 25 February 2005, the Petitioner served a statutory demand against the Company based on the shortfall. On 22 May 2005, the Petitioner petitioned to wind up the Company. As explained above, the Company was wound up on 27 June 2005.

13. On 27 June 2005, the Official Receiver (“OR”) was appointed by the court to be the provisional liquidator of the Company. On the same day, the OR appointed Mr Anthony Nedderman and Ms Yau Miu Ping of Messrs Tony Nedderman & Co to be the provisional liquidators of the Company under section 194(1A) of the CO.

14. On 31 August 2005, Mr Yip as former director of the Company submitted a statement of affairs to the OR. He states therein that the unsecured creditors as at the date of the winding up included the following:

(a) the Petitioner for the sum of HK$7,575,603.57 (bank loan and interest);

(b) New Target for the sum of HK$359,821.79 (expenses paid on behalf of the Company);

(c) Mr Yip for the sum of HK$14,558,918.36 (loan to the Company).

15. In the List of Proofs filed on 3 October 2005, the Petitioner was the only creditor of the Company who tendered proof of debt for HK$9,425,604.73.

16. Subsequently, the OR and the provisional liquidators Mr Nedderman and Ms Yau respectively requested information from Mr Yip to assist in their investigation.

17. On 2 May 2006, the provisional liquidators wrote to Mr Yip to ask for additional information/documentation on inter alia detailed schedule of transactions relating to investment properties together with the supporting documents of their disposals. On 15 June 2006, Mr Yip replied to say that he was not the managing person of the Company and had been staying overseas for a number of years until his return to Hong Kong at the beginning of 2005. In his absence the Company was supposed to be managed by Mr Yip’s Brother. Mr Yip enclosed a schedule for the transactions in relation to the investment properties of the Company together with supporting documents for the period within 3 years before the date of the winding up order, but such schedule has not been disclosed in the affirmation evidence.

18. Provisional liquidators’ reports filed in the first half of 2007 stated there were reasonable grounds to believe that the property of the Company was not likely to exceed HK$200,000.00. In the circumstances, on 6 August 2007, Master Hui ordered that the Company be wound up in a summary manner and that:

(a) Mr Nedderman and Ms Yau shall be the joint and several liquidators but there shall be no meeting of creditors and contributories under section 194 or section 206 of the CO; and

(b) there shall be no committee of inspection, and the...

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