FUNG SIU KUEN v. ORIENTAL OVERSEAS MARITIME SERVICES LTD AND OTHERS

HCCW 833/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 833 OF 2005

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D E C I S I O N

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1.  On 3 November 2005, the petitioner presented a petition to wind up Oriental Overseas Maritime Services Limited, formerly known as Billion Grand Limited (“the Company”), on the just and equitable ground.  I now have before me a summons taken out by the petitioner for an interlocutory injunction pending the hearing of the petition.  The summons was served on three respondents, the Company and the other two shareholders, Landers Holdings Limited (“Landers”) and Fok Kwong Yin (“Fok”).

2.  The petitioner seeks an interlocutory injunction to restrain the respondents in these terms:

(1)	from requisitioning and/or convening and/or holding and/or conducting the extraordinary general meeting of the Company to be held at the office of Dibb Lupton Alsop at 11:30 am on 28 November 2005; and
(2)	from requisitioning and/or convening and/or holding and/or conducting any other extraordinary general meetings of the Company.

3.  In support of this application, the petitioner relied on two affirmations he filed in these proceedings.  He referred to three affirmations made on behalf of the Company in HCAJ No. 226 of 2005 (“the admiralty action”), an admiralty action brought by the Company against the owners of a ship arrested by the Company.  The respondents oppose this application.  They have not filed any evidence in opposition.

4.  In essence, the petitioner’s justification for the interlocutory injunction is to preserve the status quo pending the resolution of the dispute, as the status quo may affect the remedy which may be available to him in these proceedings, citing Harman J in Re a Company [1985] BCLC 80 at 82i to 83b.

5.  I think it is important to look at how the events had developed and unfolded in chronological sequence in considering what is the status quo to be preserved.

6.  At all material times, there are two directors of the Company, the petitioner and Fok.

7.  According to the annual return of the Company as at 16 June 2005, there are three registered shareholders and their shareholdings are as follows:

Landers – 5,000 shares (50%);

the petitioner – 4,500 shares (45%); and

Fok – 500 shares (5%)

8.  On 21 October 2005, Landers and Fok issued a requisition to the board of directors to convene an extraordinary general meeting of the Company to consider and if thought fit approving an ordinary resolution to provide for the appointment of additional directors and that the candidate proposed by them, Pressonic Management Limited, may be appointed as an additional director with immediate effect.

9.  On 28 October 2005, the Company commenced the admiralty action against the defendant shipowner and arrested the ship to pursue a claim for unpaid hire owed to the Company by the defendant shipowner.

10.  On 3 November 2005, the petitioner presented this petition to wind up the Company, on the just and equitable ground.  The prayer did not seek any relief under section 168A of the Companies Ordinance, Cap. 32 in the alternative.

11.  The grounds for winding-up, as set out in paragraph 8 of the petition, are extremely terse and read as follows:

“Wide differences and mutual feelings of mistrust have arisen between the Petitioner and other shareholder.  And mutual confidence and understanding have been lost.  And there is deadlock in the conduct or the management of the Company and/or it is impossible to carry on business at a profit.”

12.  These bare assertions without any statement of the facts that would have enabled the equitable considerations to apply are quite simply insufficient.  I fail to see an arguable case for winding up on the just and equitable ground.  None was mentioned in the petition or even in any of the supporting affirmations filed by the petitioner in this application, let alone any case of relief under section 168A, which was not raised at all in the petition.

13.  The petitioner’s counsel, Mr Daniel Tang, stated in his written submission that this petition is presented under section 168A.  He is plainly mistaken here.

14.  Mr Tang contended that it is clear that the Company is a quasi-partnership.  The only ground for this contention is that the petitioner and George Chang, the person in control of Landers, had known each other for a very long time.  This is just not sufficient.  Nor is there any basis alleged in the petition, or even in any of the supporting affirmations filed by the petitioner, that the court may infer, on a tentative basis, that the equitable considerations in Ebrahimi v Westbourne Galleries Ltd and Others [1973] AC 360 should be imported in this instance. 

15.  Section 168A would not have assisted the petitioner either, and an amendment to rectify the omission to raise this provision in the petition would not have helped.  There is simply no factual basis for a case of unfair prejudice in the conduct of the affairs of the Company, either in the petition or in any of the supporting affirmations of the petitioner.  I have grave reservations if the dispute relating to the transfer of Fok’s shares, which I shall come to, is conduct relating to the affairs of the Company, rather than a matter involving dealings with the shares of the shareholders in their private capacity as such.  Last but not least, section 168A does not provide for a ‘no-fault divorce’, there is no jurisdiction to grant any relief under this provision unless and until a case for unfairly prejudicial conduct in the affairs of a company has been made out.

16.  So much for the apparent lack of merits in this petition, which I think is sufficient to dispose of the present application for an interlocutory injunction.

17.  I return to the sequence of events.

18.  The defendant shipowner in the admiralty action took out an application to discharge the arrest of the ship.  On 7 November 2005, directions were given for the resolution of this application.  The shipowner filed evidence on the same day alleging, inter alia, that the Company has no proper authority to commence the admiralty action and to arrest the ship.  There was no denial of the claim pursued by the Company.

19.  The assertion that the Company does not have proper authority to bring the admiralty action was founded on the allegation that the petitioner is a 50% shareholder, and that Fok’s shares were held on constructive trust for him.  It would appear that the petitioner had provided information of this allegation to the defendant shipowner.  The petitioner has produced documents of transfer signed by Fok purportedly dated 23 December 2004 and board minutes of the same date.

20.  On 10 November 2005, the Company filed three affirmations in the admiralty action refuting the petitioner’s allegation that Fok’s shares were transferred to him.  They adduced documentary evidence showing that the signed documents for the transfer of Fok’s shares, which were left undated, were cancelled, as the petitioner had failed to provide the management and audited accounts of the Company from 2002 to 2004 despite several requests, and, as a result, there was no agreement on the price for the transfer of the shares to the petitioner.  The former auditors of the Company deposed that the transfer of the shares could not be effected because without the audited accounts of the Company, the Inland Revenue Department would refuse to stamp the instrument of transfer, and that the audited accounts could not be finalised as the petitioner had failed to provide the former auditors with the disbursement vouchers for expenses incurred by the Company.

21.  Up to today, no evidence has been filed in these proceedings or in the admiralty action rebutting the Company’s evidence that there was no valid transfer of Fok’s shares to the petitioner, merely an assertion from the petitioner that he will file evidence in reply in due course.

22.  On 12 November 2005, Landers and Fok issued a notice to convene an extraordinary general meeting of the Company to consider the ordinary resolutions as per their requisitions on 21 October 2005.  The extraordinary general meeting is to be held on 28 November 2005.

23.  On 21 November 2005, the petitioner issued his application for an interlocutory injunction asserting that it is necessary to preserve the status quo.

24.  The status quo is that Fok is the registered holder of 5% of the shares in the Company.  No claim was made by the petitioner of any beneficial ownership in Fok’s shares for nearly a year, bearing in mind the transfer documents were purportedly dated 23 December 2004, until the petition was presented on 3 November 2005, after the Company had brought the admiralty action.

25.  There is no prima facie case to wind up the Company on the just and equitable ground and no arguable case of unfair prejudice in the conduct of the affairs of the Company to found relief under section 168A.  The application for an interim injunction in this situation does not get off ground.  There is no good reason for restraining the majority shareholders in exercising their legal right in holding an extraordinary general meeting of the Company, whatever may be the reason for appointing an additional director, whether it is to resolve the deadlock in the board (as alleged in the petition), or to authorise the Company to pursue its claim against the defendant shipowner (with whom the petitioner would appear to have sided).

26.  There is no need to consider the question of balance of convenience.

27.  The application must be dismissed. 

28.  Mr Coleman seeks an order that the 2^nd and 3^rd respondents’ costs of this application be paid forthwith by the petitioner on a gross sum basis.  I have considered Mr Tang’s grounds of opposition, namely, that the petitioner may wish to amend this petition and that the dispute between the parties is not over as yet.

29.  The fact remains that on the existing state of the petition and the evidence filed, I have found the application to be a non-starter.  I think it would be appropriate in this situation that the petitioner should pay the respondents’ costs forthwith.

30.  I have considered that the breakdown of legal fees of the respondents.  I assess their costs on a gross sum basis at HK$60,000.00.