RE HOI SING CONSTRUCTION CO. LTD.

HCCW 356/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO.356 OF 1997

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R E A S O N S

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1. On 3 November 1999, the Liquidators of Hoi Sing Construction Company Limited ("the Company") made an ex parte application (on paper) for the ratification of the appointment of certain creditors to the committee of inspection of the Company. On 5 November 1999, the Liquidators and the Official Receiver were directed to make submissions on various issues arising in that application. Further written submissions were made in due course pursuant to those directions. On 24 December 1999, an order was made ratifying the appointment of four creditors to the committee of inspection. The meeting of contributories was dispensed with. As the issues which arose were novel, written reasons for the order appear desirable.

Background facts

2. By order dated 7 October 1997, five creditors including Redland Concrete Limited ("Redland") were appointed members of the committee of inspection. Redland had obtained a charging order absolute over properties held by the Company prior to the commencement of the winding-up. In April 1998, Redland was paid out in full and accordingly ceased to be a creditor. Although Redland did not formally resign as a member of the committee of inspection, under section 207(5), "if a member of the committee ... compounds or arranges with his creditors ... his office shall thereupon become vacant". I accept that upon ceasing to be a creditor, Redland automatically ceased to be a member of the committee thereby creating a vacancy.

3. On 1 June 1998, the Liquidators served a notice convening a general meeting of creditors, the purpose of which was to update creditors on the progress of the liquidation and "to fill a vacancy on the committee of inspection pursuant to section 207(7) of the Companies Ordinance". The meeting was held on 19 June 1998 and as regards the vacancy, the creditors attending the meeting unanimously passed a resolution to the effect that four creditors, namely Ryoden (Holdings) Limited, Pioneer Asphalts (Hong Kong) Limited, Unistress Concrete Products (Hong Kong) Limited and K Wah Construction Materials (Hong Kong) Limited be included as members of the committee of inspection. The meeting was attended by 25 creditors.

Section 207(7)

4. Section 207(7) provides :

" (7) On a vacancy occurring in the committee the liquidator shall forthwith summon a meeting of creditors or of contributories, as the case may require, to fill the vacancy, and the meeting may, by resolution, re-appoint the same or appoint another creditor or contributory to fill the vacancy:

Provided that if the liquidator, having regard to the position in the winding up, is of the opinion that it is unnecessary for the vacancy to be filled he may apply to the court and the court may make an order that the vacancy shall not be filled, or shall not be filled except in such circumstances as may be specified in the order."

It was submitted by the Official Receiver that section 207(7) provides that a single vacancy could only be filled by another creditor or contributory but not several creditors and/or contributories. Whilst couched in terms of "a possible argument", the Liquidators did not seriously suggest that on its true construction, section 207(7) was not so limited.

Committee of inspection

5. As to the method of changing the constitution and number of the committee of inspection, it appears to be common ground that the court may order fresh first meetings or further meetings to be summoned for the purposes of section 206 of Cap.32. See Re Radford and Bright Limited (No.1) [1901] 1 Ch 272. However, this would necessitate the summoning of meetings of both the creditors and contributories (at 278). In the alternative, there is power to summon a general meeting of creditors under sections 200 and 287 of Cap.32. It is implicit in the judgment of Wright J (at 279) that should the creditors at that meeting vote to have an additional member of the committee, a meeting of contributories would have to be summoned. If the two meetings did not reach the same conclusion, then the difference would have to be determined by the court.

Is a meeting of contributories indispensable?

7. The Official Receiver's stance is that such a meeting of contributories is necessary. If there is no quorum or there is no resolution for the appointment of additional members of the committee of inspection, then it would be open to the Liquidators to make an application for such appointment. The Liquidators' position is that the court should dispense with the calling of a meeting of contributories.

8. It would appear that the Company was sold in March 1997 (prior to its liquidation) for a nominal sum to two BVI companies including Vogue Union Limited controlled by a Mr Chan Chun On who is resident in Australia. The original meeting of contributories was inquorate. The only issue which arises is whether in the circumstances, the court ought to dispense with calling a meeting of the contributories since that is unlikely to serve any useful purpose.

9. Albeit that one of the purposes of the meeting of creditors which was summoned was ostensibly to fill a vacancy pursuant to section 207(7), in my judgment, the meeting was nonetheless a general meeting of creditors within section 200(2). As a result of that meeting, the creditors' wishes are clear.

10. Is the court bound to summon a meeting of contributories before ratifying the appointment of the additional members? In the present case, there is no reason to believe that a further meeting of contributories would be any different from the first which was inquorate. It is to be noted that the contributories are BVI companies. Re Radford (No.1) is distinguishable on the facts because in that case, the contributories were not resident outside the jurisdiction and there has been no difficulty in convening a meeting of contributories. Certainly, there was nothing to suggest that a further contributories' meeting would be inquorate.

11. To require a further meeting of contributories to be summoned in the circumstances of the present case would appear to be a fruitless exercise and a waste of resources. There is virtually no likelihood of it being quorate. On these rather special facts, I would exercise the inherent jurisdiction of the court to dispense with the summoning of a further contributories' meeting.

12. As to the court's power to ratify the appointment of the additional members of the committee of inspection, I agree that there is power under section 200(3) of Cap.32 or inherent jurisdiction for the court to ratify the appointment, or alternatively to appoint the additional members with retrospective effect. See Re Associated Travel Leisure and Services Limited [1978] 2 All ER 273.