RE RIGHT CENTRE CO LTD

IN THE SUPREME COURT OF HONG KONG

COMPANIES (WINDING-UP) NO. 121 OF 1990

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JUDGMENT

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1. This is a petition by the Stock Exchange of Hong Kong Limited (the petitioner) to wind up Right Centre Company Limited (the company) on the grounds that it is insolvent and unable to pay its debts. The petition which was presented on the 27th April 1990 is based upon a claim for party and party costs of approximately $128,884.40 made in favour of the petitioner against the company in respect of unsuccessful proceedings taken by the company by way of judicial review.

2. The debt due to the petitioner and the insolvency of the company are not in dispute. However, opposition to a winding-up order has been raised by two other creditors Mr Peter Chan of Peter Chan (Secretaries) Limited who claims the sum of $2,500 and Mr Y.T. Wong who was a shareholder and director of the company who claims $259,300 on the grounds that the company was placed in creditors' voluntary liquidation by virtue of a statutory delaration made under section 228A of the Companies Ordinance on the 15th February 1990.

3. Mr Y.T. Wong was appointed to be the provisional liquidator of the company and was appointed to be the liquidator at the first meeting of creditors on the 9th March 1990. At that meeting, the representative of the petitioner, abstained from voting.

4. Both opposing creditors have expressed their dissatisfaction at the outcome of the proceedings for judicial review for Barnett J. had originally granted leave to the company upon an ex parte application to challenge a decision by the petitioner made on the 14th March 1989 to cancel the listing of the Wan Pao Navigation Company Limited in which company Right Centre Company Limited was a minority shareholder. However, the order of Barnett J. was set aside by an order made by Godfrey J. on the 15th November 1989 see In re Right Centre Co. Ltd. (1990) 1 HKLR 250.

5. Mr Chan and Mr Wong are of the opinion that as leave had been granted by Barnett J., the application for judicial review could not have been without merit. But, as Godfrey J. said in his judgment Barnett J. did not have the benefit of argument by the petitioner. Although the petitioner had complained that the application for judicial review had not been made timeously, Godfrey J. did not confine himself to this issue, but also considered the merits and he had this say at p. 261 of his judgment :-

"On the facts ...., I am constrained to say that the minority shareholder's application for a judicial review here is, indeed, without any merit. Its only real complaint is that the Stock Exchange thought it right, before restoring or continuing Wan Pao's listing, to ensure that Wan Pao complied with the requirements of the Stock Exchange for a new listing. That decision appears to me to have been so clearly within the proper ambit of the exercise of the Stock Exchange's discretion that in the absence of any suggestion, let alone evidence, of illegality, impropriety or irrationality, there is no hope of getting the minority shareholder's application off the ground. Its case is unarguable. The proceedings are yet another example of the abuse of this powerful and salutary remedy for maladministration, which will become much less valuable if it is sought to be used in inappropriate cases."

Godfrey J. concluded his judgment on p. 262 when he said as follows :-

"No allegation of illegality, impropriety, or irrationality, is really made, much less justified. An objection to a decision which you consider unfair, but which you cannot show to have been illegal, or improper or irrational, has no hope of success on a judicial review."

6. Mr Chan raised a number of matters in support of his argument that the petitioner had not advanced any special reason as to why the voluntary liquidation should not be continued. In respect of three matters : that the petitioner did not submit its proof in time in the voluntary liquidation so that it was not a creditor, that by conversion to a compulsory winding-up would amount to a waste of time and that the petitioner has not acted in good faith are quite without merit. No evidence was put forward to justify the last allegation, nor to the effect that the petitioner has taken these proceedings by way of personal revenge. Mr Chan said when he was present in court before Master Woolley on the 30th May 1990 a petition was withdrawn on the grounds that a voluntary winding-up was already in progress. Because that course was taken in that particular case is however of no relevance to the present proceedings. It was also contended that the petitioner should have taken steps to suggest an alternative liquidator at the creditors' meeting instead of abstaining, but even if they had done so, they would have been out-voted in any event. However, the main ground for objection is that the wishes of the opposing creditors should prevail as the number and the value of their debts exceeds that of the petitioner.

7. In this case the concern of the petitioner is for the appointment of a liquidator who is not only independent but seen to be independent so that he can investigate the actions of Mr Wong in causing the company to embark upon the proceedings for judicial review at a time when he knew the company was insolvent. The liquidator will also be able to investigate the debt alleged to be owed to Mr Wong by the company and to decide whether any action should be instituted against the petitioner for delisting Wan Pao.

8. The matters to be taken into account by a court in deciding whether to make a winding-up order or to allow the voluntary winding-up to continue were considered in Re Falcon R J Developments Ltd. [1987] BCLC 437 where the holding reads where relevant as follows :-

"In deciding whether or not to make a winding-up order where there was a voluntary winding up in progress, the court was not obliged to give equal weight to all debts of an equal amount but must also consider the quality of the debts and to have regard to other interests that may influence the views of the creditors and in addition it should take into account the general principles of fairness and morality which underlie the details of insolvency law.

The role of a voluntary liquidator was considered in Re Medisco Equipment Ltd. [1983] BCLC 305 where the headnote where relevant reads as follow :-

"Where a company is in a creditors' voluntary winding up and a petition is subsequently presented to wind up the company compulsorily, the voluntary liquidator may, and perhaps should, for the assistance of the court give evidence of what he has found. The voluntary liquidator can properly appear by counsel, but should not press for one view or the other his presence being merely to assist."

Another case that is relevant in this respect is In re Lubin, Rosen and Associates Ltd. [1975] 1 WLR 122 where it was held at 123 as follows :-

"...A voluntary liquidator ought not even to give the appearance of being one-sided in such matters."

The authorities also show that the views of creditors who are also members of the company will not be given the same weight as those of outside creditors, see Re Medisco Equipment Ltd. (1983) BCLC 305, Re Palmer Marine Surveys Ltd. (1986) BCLC 106 and Re Lowestoft Traffic Services Co. Ltd. (1986) BCLC 81.

9. Mr Wong, despite his appointment as the voluntary liquidator of the company, has expressed strong views in favour of the continuation of the voluntary winding-up which indicates, as was submitted by Mr Shaw, counsel for the petitioner, a lack of impartiality. Further, as he was a director and shareholder of the company, his views cannot be treated in the same manner as those of the petitioner and must accordingly be discounted. Upon the facts, Mr Wong has not shown that he is independent whilst the circumstances leading to the proceedings for judicial review require to be investigated by an independent liquidator for there is evidence that at the time he knew that the company was insolvent. The petitioner cannot be imbued with any confidence in Mr Wong and would have a justifiable sense of grievance if an independent liquidator is not appointed.

10. I am quite satisfied, in the exercise of my discretion, that in the circumstances of this case there should be the usual compulsory winding-up order with costs to be paid out of the assets. However, as the grounds of opposition that were presented were unmeritorious, I shall order the two opposing creditors to pay the costs of the hearing, yesterday and today, including those of the Official Receiver.