SHUM LAP CHI v. WAI CHI KWONG AND ANOTHER

HCMP 3912/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3912 OF 2002

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D E C I S I O N

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1. This is an application by the liquidator acting in the members' voluntary winding-up of Cheung Hing Holdings Company Limited ("the Company") for an order that all further proceedings in the members' voluntary winding-up of the Company be stayed. The application is made under sections 209(1) and 255(1) of the Companies Ordinance, Cap. 32.

2. The events leading to the application may be stated as follows.

3. The Company was incorporated in Hong Kong on 7 September 1993 with a share capital of HK$10,000.00 divided into 10,000 shares of HK$1.00 each, all of which have been issued and are fully paid up. There are only two shareholders and they are also the only directors of the Company. The Company's principal business was the manufacturing and trading of metal and plastic products.

4. By a letter to the Company dated 5 July 1999, the Lands Department served a resumption notice in respect of the property which is the registered office of the Company, for the construction of the urban and western sections of the Kowloon-Canton Railway Corporation West Rail. A without prejudice offer was made to the Company by the Lands Department on 26 July 1999 for compensation for the loss and damage to the business conducted at the registered office. This offer was not accepted by the Company and there began the process of negotiation conducted by a surveyor engaged by the Company with the Lands Department. A counter-offer was made by the Company in September 2000 and meetings were held between the parties during which the Company was pressed to cease business at its registered office.

5. On 30 June 2000, the Company ceased business and on 28 September 2000, it dismissed all its employees and severance payments were duly made.

6. On 13 January 2001, the Lands Department rejected the Company's counter-offer and made another without prejudice offer. On 18 January 2001, the Company rejected the new offer but agreed to accept the further provisional disturbance payment, without prejudice to its rights to serve a claim on the Lands Department for further compensation. Negotiations continued between the parties.

7. On 27 April 2001, the surveyor acting for the Company requested the Lands Department to provide a more detailed breakdown of the calculations of various items in the offer in January 2001 for the further consideration of the Company. The Company was then under the belief that the matter could be resolved amicably through negotiation with the Lands Department so it would not have to resort to litigation.

8. By August 2001, the Company had been dormant for about a year. The directors decided that it was no longer necessary to maintain the legal entity of the Company and at a meeting of the directors on 23 August 2001, the directors resolved to make a declaration of solvency and to hold an extraordinary general meeting of the Company for a members' voluntary winding-up, having formed the opinion that the Company would be able to pay its debts in full within 12 months from the commencement of the winding-up. The Declaration of Solvency was made on 23 August 2001 and filed with the Companies Registry the following day.

9. The extraordinary general meeting of the Company was held on 1 September 2001. A special resolution was passed to wind up the Company voluntarily and the auditor of the Company was to be appointed liquidator. An ordinary resolution was passed that the liquidator's statement of accounts shall not be required to be audited.

10. On 7 September 2001, the special and ordinary resolutions were advertised in the Gazette and on 14 September 2001, the notice of appointment of the liquidator was advertised in the Gazette.

11. As no reply was received from the Lands Department regarding the letter of the surveyor in April 2001 requesting for a breakdown of calculations, the surveyor chased for a reply in January 2002. Eventually, some information was provided by the Lands Department.

12. The Company has decided to reject the offer of the Lands Department and will bring proceedings in the Lands Tribunal seeking compensation from the government for the extinguishment and disturbance of the business of the Company. Such proceedings would have to be brought before the end of this month.

13. The purpose of the present application to stay the members' voluntary winding-up is to preserve the legal entity of the Company so that it may bring proceedings against the government in the Lands Tribunal. The application is made with the consent of all the shareholders of the Company.

14. The audited financial statements of the Company for the period from 1 January 1999 to 30 June 2000 showed that when the Company ceased business on 30 June 2000, there was a net profit of HK$1,817,328.00 for the period and that the accumulated profits carried forward after the payment of dividends for the period amounted to HK$459,927.00. The unaudited balance sheet as at 31 July 2002 showed that the Company still had accumulated profits in the said amount. There are no liabilities. It does not appear that any creditor would be affected by the stay of the members' voluntary winding-up.

15. The liquidator has confirmed there are no irregular matters or transactions which should be investigated, so there are no public interests involved such that the Court should not exercise its discretion in granting a stay of the winding-up proceedings.

16. Lastly, I am given to understand that the liquidators' fees and the expenses of the liquidation have been paid.

17. I am satisfied that the liquidator has made out a sufficient case for a stay of the members' voluntary winding-up and it would be just and beneficial to order a stay in these circumstances. I therefore make an order in terms of the draft order submitted to me by counsel.