JOHN ROBERT LEES AND ANOTHER v. TAN LAM CHUAN

HCCW 373/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 373 OF 2002

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REASONS  FOR  DECISION

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1.  I have before me a summons issued by the liquidators of Promail International (HK) Limited (“the Company”) on 10 March 2005, seeking directions in relation to an order made by Gall J dated 25 February 2005 in HCMP No. 6503 of 2000 (“the Payment Order”).

2.  The background matters giving rise to this application may be stated as follows.

3.  A director and shareholder of the Company, Tan Lam Chuan, was charged with others of conspiracy to defraud persons who might be induced to invest with the Company.  The criminal trial took place in November and December 2004.  On 14 December 2004, Mr Tan was convicted and sentenced to imprisonment on 4 January 2005.

4.  On 19 December 2000, a restraint order (“the Restraint Order”) was made by Deputy Judge Toh in HCMP No. 6503 of 2000, under section 15 of the Organised and Serious Crimes Ordinance, Cap. 455 against Mr Tan, the Company and others, restraining disposition of the properties as specified.  As regards Mr Tan, he was restrained from disposing of monies or properties held in bank accounts in his name with a specified bank.   As regards the Company, it was restrained from disposing of monies held in its name with 4 banks as specified.

5.  Since then, Mr Tan had applied on several occasions for variation of the Restraint Order, for payment of legal costs for his criminal trial from his assets under restraint.

6.  After the conviction and sentencing of Mr Tan, his solicitors, Ng & Partners, wrote to the liquidators of the Company on 16 January 2005, requesting the Company’s consent to a variation of the Restraint Order to permit payment of HK$472,000.00 for additional legal fees as a result of Mr Tan’s trial overrunning for 8 days.

7.  On 3 February 2005, the liquidators’ solicitors sought the consent of the Secretary for Justice to a discharge of the Restraint Order so that the funds under restraint may be released to the Company.

8.  On 7 February 2005, the liquidators’ solicitors refused the request of Ng & Partners to a variation of the Restraint Order and on 8 February 2005, Mr Tan issued his summons seeking a variation of the Restraint Order to permit payment of HK$472,000.00 as additional fees to his solicitors.  Also on the same day, the Secretary for Justice endorsed her consent to the liquidators’ summons to discharge the Restraint Order.  On 15 February 2005, Gall J directed that the consent summons of the liquidators was to be dealt with at the same hearing as Mr Tan’s summons for variation of the Restraint Order but after Mr Tan’s summons was disposed of.

9.  At the hearing before Gall J on 25 February 2005, having heard the liquidators’ opposition to Mr Tan’s application, he made the Payment Order which is to the effect that the Restraint Order was to be further varied in that money was to be released to Mr Tan from the bank accounts of the Company to pay HK$472,000.00, being the legal costs of Mr Tan as a result of the overrunning of his criminal case.  Gall J further ordered that the said sum was to be paid into the bank account of Ng & Partners within 14 days thereof.  After making the Payment Order, Gall J then dealt with the consent summons of the liquidators and the Secretary for Justice and made an order in terms (“the Discharge Order”).

10.  The liquidators obtained a sealed copy of the Discharge Order on 1 March 2005, before Ng & Partners obtained a sealed copy of the Payment Order on 4 March 2005.  The liquidators immediately set to work and served sealed copies of the Discharge Order on the banks and requested the funds held in the accounts of the Company be transferred to the Official Receiver’s bank account.  As at 9 March 2005, all the funds in the Company’s account with various banks, with the exception of Hang Seng Bank, were in the process of being transferred to the Official Receiver, in the total sum of about HK$48.6 million.

11.  On 10 March 2005, the liquidators issued the present summons for directions on the basis that there are insufficient funds in the bank accounts of the Company to comply with the Payment Order. 

12.  Ng & Partners wrote to the Official Receiver and the liquidators’ solicitors demanding compliance with the Payment Order but to no avail.  The liquidators’ solicitors took the stance that the Payment Order was not directed at the liquidators or the Company and they have no obligation to leave a balance in the bank accounts of the Company to satisfy the Payment Order.  They further contended that they have only taken control of the Company’s bank accounts on the discharge of the Restraint Order and it was not their fault that the accounts were closed when the Payment Order was served on various banks.  The Official Receiver replied that he would not release funds out of the companies liquidation account without the express authority of the liquidators.

13.  The liquidators are plainly dissatisfied with the Payment Order.  They have contended that the order was wrongly made as it was not appropriate to order that the assets of the Company, which is in liquidation, be applied to pay the legal fees of one of its shareholders.  The proper course for the liquidators to take is to lodge an appeal against the Payment Order, if they take the view that it was wrongly made.  In the meantime, as there is no stay of the Payment Order pending any appeal, that order must be complied with, in letter and in spirit.

14.  For these reasons, I have made an order at the hearing directing the liquidators to authorize the Official Receiver to pay out of the companies liquidation account HK$472,000.00 to Ng & Partners, within 14 days hereof, in compliance with the Payment Order.  I have also ordered, for avoidance of doubt, and if leave is required, leave be given to the liquidators under section 186 of Cap. 32 to apply for leave to appeal against the Payment Order out of time and to pursue such appeal, if leave be granted.  I mention that leave was given for avoidance of doubt, as it would appear from the decision of Jones J in In re Bank of Credit and Commerce Hong Kong Limited [1992] 2 HKLR 46 that no such leave would be required under section 186.

15.  I also ordered that the costs of Ng & Partners in this application should be paid out of the Company’s assets.  It seems to me that the conduct of the liquidators should warrant awarding costs to Ng & Partners on a higher basis and I have ordered that costs should be taxed on the common fund basis.  As for the liquidators’ own costs, I have ordered that their costs are to be paid out of the assets of the Company.