XCHRX CHAN DAT CHAN AND ANOTHER v. HEEPSON HOLDINGS LTD.

HCCW 859/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO. 859 OF 2000

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D E C I S I O N

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1. This is an application by 2 persons who, between them, hold 55% of the shares of the Company and who are both directors, for a validation order that in the event that an order to wind up the Company is made on the Petition, payments made into or out of the bank accounts of the Company in the ordinary course of business would not be avoided under Section 182 of the Companies Ordinance.

2. The Petition was presented on 16 September 2000 by 2 other persons who are the remaining shareholders and who are also directors of the Company.

3. The Petition is for the winding up of the Company on the just and equitable ground; alternatively, for an order under Section 168A of the Companies Ordinance on the ground of unfair prejudice.

4. Basically, it is a shareholders' dispute and it is now abundantly clear that the shareholders are split into 2 camps, with Mr Chan Dat Chan and Mr Lau Ngan Chai in one camp, and Mr Yick Sun Kit and Mr Lam Sei Pui in the other camp.

5. There is no allegation in the Petition that the Company is insolvent. Indeed, the Petitioners have expressly asserted that the Company is profitable, and that state of affairs has been reflected in the latest management accounts which have been exhibited to the affirmation of Mr Yick.

6. From the authorities which have been included in the skeleton provided to me by Mr Ernest Cheung, counsel for Mr Yick, it is clear that if the Company is solvent, and the proposed order is to enable the Company to continue trading, the Court would generally grant an order.

7. Today, Ms Tse for the Petitioners has not objected to the order as such but has asked that 2 conditions be imposed. The first condition is that the Company's bank accounts be operated by either Mr Chan and Mr Yick jointly or by Mr Lau and Mr Lam jointly; in other words, that all cheques should be signed jointly by one shareholder from each camp. At the moment, it is possible for Mr Yick and Mr Lam to jointly sign the company cheques.

8. The second condition that is proposed is that the management, finance, kitchen and accounts departments of the Company shall, in all respects and as reasonably practicable, be run on the present set-up until the Petition is heard or further order.

9. In relation to the first condition, the position of Mr Yick and Mr Lam is that they fear that Mr Chan and Mr Lau may pose difficulties in the signing of cheques. There is no evidence that they have previously been obstructive in this exercise, and I would also note that Mr Chan and Mr Lau themselves hold 45% of the shares of this Company, not a small proportion, and that it would be against their interests as well if they are in any way obstructive so that this Company cannot continue to run profitably.

10. Accordingly, in the exercise of my discretion, I would impose as a condition to the exercise of this order that the Company's bank accounts be operated by either Mr Chan and Mr Yick jointly, or by Mr Lau and Mr Lam jointly.

11. In relation to the second condition, I find it difficult to see how that can be policed effectively and practicably by the Court. In any event, it would appear to me that since the order that is sought pertains only to payments into and out of the bank accounts of the Company and dispositions of the property of the Company made in the ordinary course of business, should any payments into or out of the bank accounts or any dispositions of the property be extraordinarily done, outside the course of its business, then those payments or dispositions would not be covered in any event by the order. Consequently, I would not accede to the second condition which is sought by the Petitioners.

12. Consequently, I would order that notwithstanding the presentation of the Petition filed herein on 16 September 2000,

(a) payments made into or out of the bank accounts of the Company in the ordinary course of business of the Company; and

(b) dispositions of the property of the Company made in the ordinary course of business for proper value

between the date of presentation of the Petition and the date of judgment of the Petition or on the hearing and determination of any motion for striking out the said Petition whichever is the latter, shall not be void by virtue of Section 182 of the Companies Ordinance in the event of an order for the winding up of the Company being made on the said Petition, provided that the relevant bank shall be under no obligation to verify for itself whether any transaction through the Company's bank accounts is in the ordinary course of business, or that it represents full market value for the relevant transaction, and subject to the condition that hereafter all cheques drawn on the Company's accounts that shall be executed by either Chan Dat Chan and Yick Sun Kit jointly or Lau Ngan Chai and Lam Sei Pui jointly.