HO FUNG YUEN AND ANOTHER v. LUI WAN HO AND ANOTHER

HCMP 1055/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1055 OF 2004

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D E C I S I O N

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1. I have an application issued by Ho Fung Yuen and Lam Hak Sing under sections 248(4) and 252(2) of the Companies Ordinance, Cap. 32.

2. The applicants seek an order that the dissolution of Concord United Limited (in creditors' voluntary liquidation) ("the Company") be deferred to a date as the court thinks fit and that the liquidators Lui Wan Ho and Chow Chi Tong, the respondents herein, be removed and Yeung Ping Hung be appointed in their place. The applicants own all the shares in the Company and are the only directors.

3. In May 2003, Wing Hang Bank Limited brought a mortgage action in HCMP No. 1944 of 2003 ("the High Court Action") against the Company, Mr Lam and other parties claiming inter alia HK$1,933,716.66 and US$104,993.46, being moneys due to the bank under a legal charge. The legal charge was executed by the Company as the mortgagor in favour of the bank to secure the liabilities of a borrower known as Gammon Trading Company wholly owned by Adpon Development Limited.

4. The Company filed an acknowledgement of service in May 2003 stating its intention to contest the proceedings. Thereafter, no action was taken by the bank in the High Court Action until an affirmation was filed by the bank in March this year. In the meantime, in the belief that the bank would not be proceeding with the High Court Action or that the bank would not seek to pursue other remedies against the Company and Mr Lam to recover any deficit that might arise from the realisation of the mortgaged property, the applicants passed the necessary resolutions on 19 September 2003 to wind up the Company voluntarily under section 241 and to appoint the respondents as the liquidators.

5. On 13 February 2004, the final meetings of the members and of the creditors of the Company were convened and the return of the final meetings was filed with the Registrar of Companies. After the applicants received the affirmation of the bank in the High Court Action in March 2004, they obtained legal advice to the effect that the Company might have reasonable grounds to defend the High Court Action. They made an oral request to the respondents to appoint solicitors to defend the High Court Action and to apply to court to defer the dissolution of the Company for this purpose.

6. Mr Lui of the respondents explained to the applicants that there are no funds in the Company at all. He requested the applicants to provide particulars of the grounds and documentation in support of the defence in the High Court Action and a letter of indemnity for the costs that might be incurred by the respondents in defending the High Court Action and deferring the dissolution.

7. On 30 March 2004, the solicitors instructed by the applicants wrote to the respondents setting out the grounds for defending the High Court Action and stating that the costs and disbursements for defending the High Court Action would be borne solely by one of the applicants, Mr Ho. However, no documentary support for the defence was provided to the respondents nor were they given a letter of indemnity in respect of any liability they might incur in defending the High Court Action.

8. On 27 April 2004, this originating summons was issued by the applicants seeking the reliefs I have mentioned. When the matter came before me on 13 May 2004, I adjourned the application for the applicants to file further evidence to address the concerns of the respondents. As the Company would be dissolved on 15 May 2004, being three months after the registration of the return of the final meetings, I ordered that the dissolution of the Company be deferred to 21 May 2004 and that the applicants are to file further evidence by 20 May 2004.

9. I now have a further affirmation from Mr Ho and an affirmation from the proposed liquidator Mr Yeung. In his further affirmation, Mr Ho set out the grounds of defence in the High Court Action. Suffice it to say that as accepted by his counsel, Mr Ronald Lau, full details are still not provided as to the grounds of defence. The highest Mr Lau was able to put it was that, on the evidence of Mr Ho, one cannot preclude the possibility of a valid defence in the High Court Action.

10. My main concern is the liability of the Company for costs in the High Court Action in the event that the defence is not successful. The Company has no funds at all. Mr Ho deposed in his affirmation that he has reached an agreement with the proposed liquidator Mr Yeung regarding his fees and that he has agreed to bear all the costs and disbursements in defending the High Court Action.

11. Mr Yeung, who is a professional accountant, stated in his affirmation that he has agreed to act as the liquidator and he has agreed his fees with the applicants to act as such to handle the winding up of the Company and to contest the High Court Action. The applicants have agreed with him that they would bear the legal costs and disbursements incurred. He also confirmed his understanding that he will be liable to pay costs and disbursements in defending the High Court Action if the costs and disbursements cannot be recovered from the applicants.

12. That being the position, I am not minded to pose any difficulty in the way of the Company if it intends to defend the High Court Action on legal advice. As the respondents are unwilling to continue without a proper letter of indemnity and that the proposed liquidator is prepared to act on the basis of his agreement with the applicants and he appreciates the legal consequences in so acting, I will also grant the relief sought and remove the respondents from their office and appoint the proposed liquidator in their place.

13. I make the following orders.

(1) the dissolution of the Company is to be deferred to 19 November 2004;

(2) the applicants are to file an office copy of this order with the Registrar of Companies within 7 days hereof;

(3) the respondents are hereby removed from the office of liquidators and Yeung Ping Hung is to be appointed in their place; and

(4) the costs of the respondents in this application are to be paid by the applicants, to be taxed if not agreed.