HKSC FOODS LTD (IN LIQUIDATION) v. O'DEA PETER JOHN

HCCW456/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO.456 OF 2008

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DECISION

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1.  This is the application of the Liquidators of HKSC Foods Limited (“the Company”) under section 182 of the Companies Ordinance, Cap.32 for an order declaring 13 payments paid by the Company to the respondent and his company, HKSC Foods Supplies Limited, to be void and also for an order that the respondent pays to the Company the sum of HK$660,100, being the total amount of the 13 payments, together with interest thereon.

The relevant facts

2.  The Company was incorporated in 2005.  On 2 October 2008, a creditor’s winding up petition was presented against the Company.  The respondent was at the time the sole director and one of the shareholders of the Company.

3.  The winding up petition was served on the Company at its registered office on 4 October 2008.  By an email dated 6 October 2008 from a Miss Ma of the Company’s corporate secretary, the respondent was informed of the presentation and service of the winding up petition on the Company.

4.  On 21 October 2008, HKSC Foods Supplies Limited (“HFSL”) was incorporated.  The respondent was and is the sole director and sole shareholder of HFSL.

5.  On 15 July 2009, a winding up order was made against the Company.

6.  Upon examination of the books and records and bank statements of the Company in respect of transactions that took place after the presentation of the winding up petition, the Liquidators discovered that a total of 19 payments had been made by the Company from its bank account maintained with United Overseas Bank Limited.  The present application relates to 13 of them, the particulars are as below:

	Date	Recipient	Amount (HK$)
1.	19/12/2008	the respondent	70,000.00
2.	30/12/2008	HFSL	100,000.00
3.	12/1/2009	the respondent	110,000.00
4.	4/2/2009	the respondent	70,000.00
5.	19/2/2009	the respondent	70,000.00
6.	3/3/2009	the respondent	100,000.00
7.	5/3/2009	the respondent	15,000.00
8.	10/3/2009	the respondent	10,500.00
9.	12/3/2009	the respondent	20,000.00
10.	18/3/2009	the respondent	60,000.00
11.	6/4/2009	the respondent	15,000.00
12.	14/4/2009	the respondent	14,000.00
13.	21/4/2009	the respondent	5,600.00
			Total: 660,100.00

7.  In respect of the 12 payments to the respondent, they were made by cheques.  As for the payment to HFSL, it was by bank transfer under the written instruction of the respondent.

8.  Between 26 February and 31 August 2010, the Liquidators had made four written demands to the respondent for repayment, but to no avail.

9.  The respondent was interviewed by the Liquidators on 4 March and 13 April 2010, during which oral demands for repayment were made to him.  The respondent claimed to have a claim against the Company and further claimed that the payment to HFSL had been repaid.  He has however not provided to the Liquidators any proof or support for these assertions.  He has also not lodged any proof of debt with the Liquidators.

The application

10.  The Liquidators issued the present summons on 19 October 2010.  On 28 October 2010, Messrs Tanner De Witt (“TDW”) filed a Notice to Act to represent the respondent.  Subsequently, TDW reached agreement with the Liquidators’ solicitors on the further conduct of the application.  By a consent order dated 13 December 2010, the respondent was given until 10 January 2011 to file and serve his affidavit in opposition and the application was adjourned for a three-hour hearing to be fixed. In the end, however, no evidence was filed by the respondent.

11.  In light of this and with a view to save time and costs, the Liquidators wrote to TDW on 13 January 2011, inviting them to agree to dispose of the application by a 30-minute hearing or on paper.  TDW replied that they would obtain the respondent’s instructions, but did not revert with any substantive reply.  On 24 January 2011, the solicitors for the Liquidators wrote to the court to seek directions.  Upon the court’s enquiry as to whether there was any objection to the course proposed by the Liquidators, TDW indicated they had not been able to obtain instruction from the respondent.

12.  Given that there is no evidence from the respondent to contest the application, a three-hour hearing is clearly not necessary.  Since there is no agreement to a paper disposal, I directed that the application be listed for a 30-minute hearing today.

13.  One day before this hearing, however, TDW wrote to seek the court’s approval to dispensing with their attendance at this hearing on the basis that they had not received any instruction from the respondent and that they would be applying to cease to act for the respondent.  No such application is presently on foot.  I did not sanction DW’s request as I am of the view that any application to cease acting for the respondent should have been made much earlier on.  It has been for some time, and no later than January 2011, that they have not been able to get instruction from the respondent.  Even if an application to cease to act were to be heard and granted today, there would not be sufficient time for the necessary procedure to be completed to enable TDW to come off the record as the respondent’s solicitors.  As long as they remain as solicitors for the respondent, they are duty bound to attend this hearing.

Reasons for decision

14.  I turn now to deal with the merits of the application.  By reason of section 184(2) of the Companies Ordinance, the winding up of the Company is deemed to have commenced at the time of the presentation of the winding up petition, namely, 2 October 2008.

15.  Section 182 of the Companies Ordinance provides that in a winding up by the court, any disposition of the property of the company made after the commencement of the winding up shall, unless the court otherwise orders, be void.

16.  It is clear from the evidence before the court that the 13 payments in question were dispositions of the Company’s property and were made after 2 October 2008.  The evidence further shows that the respondent had knowledge of the winding up petition when the payments were made and HFSL was only incorporated afterwards.  The Liquidators’ evidence also reveals that when the 13 payments were made, the Company was insolvent.  

17.  Neither the respondent nor HFSL has obtained any validation order from the court. 

18.  There is no evidence from the respondent to explain these payments.  As noted above, despite his assertions made to the Liquidators at the two meetings in 2010, the respondent has not put forward any proof to substantiate them.  Miss Tsang who appears for him today has advanced no argument against the application either.

19.  In these circumstances, section 182 of the Companies Ordinance applies to all these 13 payments to render them void.

Orders

20.  Accordingly, I make the following orders:

(1)             There is a declaration that the 13 payments totalling HK$660,100.00 paid by the Company to the respondent and HFSL as particularized in the summons are void.

(2)             The respondent shall within 14 days from the date of this decision pay to the Liquidators the said sum of HK$660,100, together with interests thereon at judgment rate from the date of the summons (i.e. 19 October 2010) until full payment.

Costs

21.  There is no reason why the respondent should not bear the Liquidators’ costs of this application.  The Liquidators have provided a statement of costs for summary assessment of their costs under Order 62 rule 9A of Rules of the High Court, Cap.4A.  The total costs sought are HK$43,061.

22.  Miss Tsang commented that the amount under Part D for professional work was excessive since the application was not really contested and the Liquidators’ solicitors had been made aware of this.  In respect of the work for preparation and perusal of documents, when they were incurred, the Liquidators and their solicitors did not know there would be no opposition.  As for the preparation for this hearing, I agree with Miss Ngo for the Liquidators that even though there was no real opposition, unless the application is consented to, the Liquidators come under a duty to satisfy the court as to the propriety of the application and their entitlement to the relief sought.  Miss Ngo had properly provided the court with a written submission, a chronology and a list of authorities and the authorities.  The 1.5 hours claimed is not excessive. I allow the costs claimed in full. 

23.  There is an order that the respondent pays the costs of the Liquidators summarily assessed at HK$43,061.