RE BEAUTIFUL CORPORATION LTD

HCCW 732/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 732 OF 2003

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D E C I S I O N

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1. This is an application for the appointment of provisional liquidators made ex parte on notice by the petitioner, Miss Chan Yuen Fung Dawn, a shareholder of the subject company, Beautiful Corporation Limited ("the Company"). The petitioner presented a creditor's petition to wind up the Company on 8 July 2003.

2. On 10 July 2003, the petitioner made an ex parte application to me for the appointment of provisional liquidators. Notice of the application was given to Ms Hua Thieu Man Jeannie, who is the other shareholder of the Company. Ms Hua is the opposing contributory in this petition. On that occasion, I made no order for the appointment of provisional liquidators upon an undertaking given by Ms Hua to the court not to dispose of or dissipate any of the assets or funds of the Company until the determination of the petition or further order, and to file an affirmation within 21 days giving: 1) particulars as to assets or funds of the Company within her custody, control or possession; and 2) an account of the movement of the assets of the Company from 13 May 2003 to the date of the order, not limited to the name and address of the recipient, the type, quantity and other particulars of assets removed, the date of dissipation, the consideration received and an account of any value received.

3. Ms Hua has filed an affirmation on 31 July 2003 to comply with that undertaking to the court. It is, however, alleged by the petitioner that she has not made full disclosure as the required details were not given of the assets removed to her residence.

4. Of particular concern to the petitioner are the perishable beauty products which make up a large part of the assets of the Company. The petitioner and Ms Hua have not been able to reach agreement as to the method by which these assets are to be sold for the cash realised to be deposited with the Official Receiver pending the determination of the petition. The petitioner has suggested disposal of the perishable goods by public auction. Ms Hua counter-proposed that she should be allowed to find "suitable clients" and that the goods be sold by private treaty at a "reasonable price". It seems unlikely there would be any agreement on the mode or the price of disposition for these perishable goods. The petitioner therefore renews her application for the appointment of provisional liquidators.

5. Ms Hua has appeared by solicitors today. Her solicitors submitted that in view of the limited time given to Ms Hua of the application today, they have not been able to take full instructions from Ms Hua and no submissions would be made on her behalf at this hearing.

6. I have decided to proceed with the application today, as the additional material placed before the court consists largely of correspondence between the solicitors of the petitioner and the solicitors of Ms Hua and Ms Hua's position has already been set out in some detail in the letters of her solicitors. I have taken full notice of her solicitors' letters.

7. I am satisfied there is a prima facie ground in the petition for the winding up of the Company.

8. The Company is, on the available evidence, insolvent. It has ceased operation in June or July 2003. The business premises have been surrendered to the landlord. The bank creditor has made a final demand for payment of its debt of HK$400,000 odd. Four former employees have obtained an award against the Company in the Labour Tribunal on 19 August 2003 for HK$86,000 odd. Leaving aside the debt to the petitioner which is disputed by Ms Hua, there are claims by customers who have made prepayments for beauty treatment but have not received treatment when the Company ceased operation.

9. Further, as I have mentioned, there are perishable beauty products of the Company, part of which are stored in a warehouse in C C Wu Building in Wanchai.

10. There is complete breakdown between the petitioner and Ms Hua. The petitioner has resigned as a director and Ms Hua would appear to be unwilling to handle matters of the Company passed on to her by the petitioner's solicitors.

11. There is evidence before this court that some of the customers have denied that they have received beauty products from the Company as deposed to by Ms Hua in her Affirmation of 31 July 2003 in return for giving up their claims against the Company in respect of the beauty treatment that has not been rendered. Ms Hua claims that she has removed part of the stocks of the Company to her residence and that such stocks are held by her on behalf of those customers who have agreed to give up their claims against the Company. According to a schedule exhibited to Ms Hua's Affirmation, the value of the assets removed to her residence is over HK$700,000.

12. Mrs Sit, who appears for the Official Receiver, has submitted for my consideration that it may not be necessary to appoint provisional liquidators as the petitioner, being a contributory, could apply to court for a validation order to dispose of the perishable goods. That, in my view, would not solve the entire problem. The perishable goods are held in two places, at the warehouse in C C Wu Building and at Ms Hua's residence. There is dispute whether the property in the stocks removed to Ms Hua's residence has already passed to the customers as alleged by her. Further, on Ms Hua's contention, the goods removed to her residence would not come within the terms of her undertaking to the court on 10 July 2003 not to dispose of the assets of the Company.

13. It seems to me it is right that an independent person should be appointed to take possession of these perishable goods and deal properly with any claims that may be made by the customers in respect of these goods. The assets of the Company would clearly need to be preserved and realised for the benefit of the creditors pending the determination of the petition.

14. For the above reasons, I will make an order appointing provisional liquidators for the Company. I will hear the petitioner and the Official Receiver on the terms of the order for appointment.