LAU CHO YIP v. WASSER COMPANY LIMITED and Others

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

(COMPANIES (WINDING-UP) No. 510/1994)

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D E C I S I O N

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Rogers, J.:

1. This is an application made in the course of a winding-up petition. The application started as an application under section 182 but, by an amendment, the reference to section 182 was deleted and the order now sought is for an interim payment.

2. Briefly, the petition is a petition under the just and equitable ground. The company dealt in more than one business, but it was set up to deal in piece goods. There were at all material times 4 directors, namely the Petitioner and the 2nd, 3rd and 4th Respondents, and they were the only shareholders. Come 1990, the dispute between the Petitioner and the other shareholders and directors crystallised and in effect the Petitioner wanted out. He was quite prepared to be bought out, but that up until today has not happened. The petitioner prays for winding-up and as an alternative relief is sought of a buy out at a fair price.

3. It seems that the three remaining directors, namely the 2nd, 3rd and 4th Respondents, received payment from the company by way of payments to service companies which they had set up and it is partly those payments over the years which have been the subject of complaint. Nevertheless, the payments have continued until the winding-up petition. The order sought today, in effect, seeks to continue payments to the three service companies. The difficulty seems to me to be this. The basis upon which the payments are to be made is not made clear. I am at a loss to know whether these are payments in the ordinary course of business to people who are providing services to the company, or whether these are payments out of capital, or by way of loan, or even by way of a partial dividend perhaps. It is that which eventually causes me to have to refuse the relief in this matter.

4. There are no service agreements as such between the three companies and the company itself. From the submissions which have been made, the three Respondents seeking the payments, put their case on the basis that they will be entitled to this money at the end of the day. But it seems to me very possibly in this case that in lieu of a winding-up, there will be an alternative order made for a buy out, and the question will be the terms on which that buy out is ordered. Of course, if the buy out does not go ahead, then there may have to be a winding-up. If, in effect, one or more of the three Respondents buys the shares of the Petitioner, neither the three Respondents nor indeed their service companies will be entitled to the capital of the company as such, because there will not be any winding-up.

5. In my view, I have to look at the payments which I am asked to order at this stage in the light of what is in the interests of the company. Since the application has not been put on the basis that these payments are needed to keep the company going and as ordinary payments for the company, I find that I am not in a position to be able to order those payments now.

6. Having heard the parties as to the state of readiness, it seems that the evidence on this petition is complete and is, I am happy to say, not very voluminous. There is a question now of discovery, but I understand that although that has been delayed, both parties say they are ready. In my view, discovery can take place very quickly and, subject to anything emerging on discovery, there is no reason why this petition should not be set down for hearing in a relatively short time and the matter disposed of. This I think, would be a very much more satisfactory solution to all parties than for it to linger on.

7. In those circumstances, as I say, I am unable to accede to the relief sought on this motion.