CHEUNG SHU CHUEN v. LEE DER INDUSTRIAL CO AND ANOTHER

HCCW 471/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 471 OF 2008

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J U D G M E N T

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1.  I will strike out the Petition.  I will also refuse leave to serve the draft Amended Petition.

2.  In my view neither the Petition nor the Amended Petition discloses any basis for an Order to wind up the company on the just and equitable ground or for relief in respect of unfair prejudice.

3.  The Petitioner’s complaints are purportedly particularised in §10 of the Petition and Amended Petition respectively.  I will quickly run through the “Particulars” given to explain why, in each case, I do not believe an arguable basis for relief is made out.

4.  It is accepted that the Deceased (Cheung Shu Hung) and Chiu Kwei Tsun ran the Company as a quasi-partnership.  The Petitioner is the Deceased’s administrator.  He became so by letters of administration granted on 24 June 2008.

5.  First, the Petitioner complains that in August and September 2007 he went to the Company’s Foshan factory.  But the Company refused to allow him “to handle the Deceased’s estate thereat”.

6.  I do not see a ground of complaint.  This was long before the Petitioner became the Deceased’s administrator.  Until then, Chiu would have been entitled to refuse the Petitioner entry into the factory pending the Petitioner establishing proper authority to act on the Deceased’s behalf.

7.  Mr. Kenneth Chan (appearing for the Petitioner) refers me to Table A, Art. 29.  But even on the assumption that such provision were applicable here, I do not see how it takes the matter further. 

8.  Art. 29 provides that a legal representative shall be recognised by a company as having title to a person’s shares upon death.  The point therefore remains.  The Petitioner did not become the Deceased’s legal representative until June 2008.

9.  Second, the Petitioner complains that he was barred from trying “to handle the Deceased’s estate” when he went to the Company’s Hong Kong offices in September and October 2007.

10.  The same point arises.  This was long before the Deceased was appointed the Deceased’s administrator.  The Company was entitled to require him to show authority (which he then did not have) to handle the Deceased’s estate.

11.  Third, the Petitioner complains that he discovered that sums belonging to the Deceased had been transferred to the Company’s account in payment of a Bank debt on 24 August 2007.

12.  There is nothing to this.  The amounts were transferred to the Bank in payment of a Company debt pursuant to security arrangements among the Bank, the Deceased and Chiu’s son.

13.  The result was that, despite the equal shareholding of the Deceased and Chiu in the Company, security provided by the Deceased bore the major part of the Company debt that the Bank sought to extinguish.  Mr. Chan says that this was unreasonable and unjustified.

14.  The mere fact that the Bank (of its own decision) took the larger part of its repayment from security provided by the Deceased cannot by itself amount to unfair prejudice. 

15.  There is, for instance, nothing in the Petition (nor Amended Petition) about how all other Company debts were shared among the Deceased and Chiu.  Nor did anything prevent the Deceased and Chiu from agreeing to bear any Company debts in any particular way.

16.  Therefore, in the absence of far greater detail from the Petitioner as to how precisely overall prejudice arises to him, I cannot see that the bare allegation in the Petition and Amended Petition can succeed.

17.  Fourth, complaint is made about the board being deadlocked as a result of the death of the Deceased.

18.  But I do not see how deadlock by itself gives rise to unfair prejudice.  For instance, in some circumstances, where there is deadlock, a party may apply to the Court to break the deadlock.  See Companies Ordinance (Cap.32) s.114B.

19.  Nor do I see why there should necessarily be deadlock here.

20.  The Petitioner may register as shareholder of the Deceased’s  shares and accordingly vote in shareholder meetings. As far as such meetings are concerned, the Petitioner may exercise voting powers associated with the shares.

21.  Insofar as board meetings are concerned, Chiu has in fact caused Dickson Management Ltd. to be appointed a director.

22.  Fifth, complaint is then made about Dickson’s appointment as director “without the Petitioner’s consent”.

23.  But that fact without more cannot constitute unfair prejudice.  In what way, has Dickson’s appointment caused the Petitioner prejudice?  What precise acts of Dickson and Chiu as directors have caused the Petitioner prejudice?  No particulars have been given.

24.  The Deceased and Chiu were in quasi-partnership.  That is a personal relationship that does not survive death.  The Petitioner (as administrator) cannot claim that he has succeeded the Deceased as Chiu’s quasi-partner. See Murray’s Judicial Trustee Factor v. Thomas Murray &Sons [1993] BCLC 1437. 

25.  Consequently, there can have been no expectation on the Petitioner’s part that he would have a say in governing the Company.

26.  I note that Chiu has deposed that Dickson’s appointment was “simply to ratify the acts done by me on behalf of the Company after the death of the Deceased”. 

27.  Sixth, complaint is made that the Petitioner has been denied sight of the Company’s accounts. 

28.  But those were provided in October 2008.  The earlier refusal of the accounts cannot now be a basis for winding up the Company or finding unfair prejudice.

29.  Seventh, complaint is made that the audited reports were solely prepared by Chiu and “all the figures contained in the said 3 Directors’ Reports had never been verified, confirmed and approved by the Deceased”. 

30.  But no further particulars are given as to what the audited accounts should show.  It is unclear how the accounts as signed off by Chiu are detrimental to the Petitioner’s (or for that matter the Deceased’s) interests.  There is merely a bare allegation.

31.  I cannot deduce any case of unfair prejudice in the absence of further particulars.

32.  Eighth, it is said that there is an action (HCA No. A2191 of 2008 filed by Chiu on 4 November 2008) claiming that the Deceased owed substantial sums to a wholly separate partnership between the Deceased and Chiu.

33.  This is irrelevant to the present dispute which concerns the Company or quasi-partnership (and not the actual partnership business) between the Deceased and Chiu.

34.  By reason of the foregoing, I do not think that the claim as advanced in the Petition or Amended Petition has any prospect of success.