RE RUTLEDGE OLIFIELD SERVICE & SUPPLIES LIMITED

COMPANIES WINDING-UP

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JUDGMENT

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1. This is an application by the petitioner Gordon William Rut1edge under Section 193 of the Companies Ordinance for an order that the Official Receiver be appointed as the provisional liquidator of Rut1edge Oilfield Service & Supplies Limited (the Company).

2. A petition was presented on the 5th March 1985 to wind up the company on the just and equitable ground.

3. The company was incorporated on the 16th October 1981. The paid up capital is HK$12,500.00. The company was formed for the purpose of providing certain specia1ised services to the oil exploration and drilling industry in South East Asia. The first directors were the petitioner, his wife and Mr. A. Stogdill.

4. In 1982 the petitioner decided that the company required additional capital. This resulted in a partnership scheme whereby the company would acquire new members, some of whom would be directors, who would provide security to the company's bankers for credit facilities up to US$1.5 million. Those persons who provided security were called the investor group whilst the petitioner and two other directors Mr. Stogdi11 and Mr. McCabe, would constitute the management group. The petitioner holds 2,999 shares in the company.

5. The petitioner was appointed to be the managing director of the company by an agreement dated the 16th July 1983 for the period from the 1st January 1983 to the 31st December 1984. The company contends that the petitioner's appointment has expired by eff1uxion of time although at a board meeting held on the18th January 1985 he was purportedly removed. A shareholders agreement was executed on the 16th August 1983.

6. The petitioner alleges that members of the investor group have excluded him from the management and affairs of the company resulting in an irretrievable breakdown between the petitioner and the other shareholders. He sets out a list of his comp1aints which may be listed under eight heads. First the controlling directors have acted in complete disregard for his rights as a shareholder and he believes that they will continue to do so. Second the controlling directors who are also members of the investor group know little or nothing about the management of the company. Third the petitioner has been excluded as a signatory from the company's bank accounts. Fourth the petitioner lent US$49,000.00 to the company as working capital. No directors' fees were to be paid until the loan was repaid, but some directors' fees have in fact been paid although the loan has not been repaid. Fifth an E.G.M. of the company has been fixed to take place on the 12th April 1985 in Rhode Island U.S.A. to consider a special resolution for the removal of the petitioner as a director of the company, to put the company into a members' voluntary liquidation and to apply for a stay of the present proceedings. Sixth that no reasonable attempt has been made to compensate the petitioner for his shareholding. Seventh that no salary has been paid to the petitioner for January 1985. Eight the company operates through the agency of Rut1edge Oilfield Service & Supplies Pty. Ltd. a company incorporated in Singapore under an agency agreement dated the 3rd November 1982 which is alleged by the petitioner to have been terminated by the company. The petitioner and his wife are directors and shareholders of the Singapore company.

7. In his affidavit sworn on the 27th March 1985 the petitioner says that he believes the persons who control the board will dissipate the assets to the detriment of the other shareholders, but this statement can only refer to himself as no other shareholder is concerned. He states that the assets primarily consist of oil related plant and equipment in Singapore, a bank deposit in Hong Kong and the goodwill under the company's contracts in South East Asia. The bank account in Hong Kong is the only asset within the Jurisdiction and on the 30th January 1985 amounted to US$232,226.90. Although the petitioner averred that he believed the original figure would have diminished it has in fact been increased to over US$250,000.00. He refers to the seizure by the directors of the assets of the Singapore company and the proceedings that have been instituted there in the High Court against him and the Singapore company.

8. Efforts have been made by the parties to effect a settlement, but without success.

9. The petitioner has not invoked the provisions of Article 25 of the Articles of Association which provides that in case of differences arising between the transferor and the purchasing member as to the fair value of a share the auditor shall on the application of either party certify in writing the sum which in his opinion is the fair value. The articles also include an arbitration clause, but the petitioner has provided no explanation as to why he has not availed himself of this provision.

10. The petition is opposed by the company and 13 contributories. The petition is contested on the grounds that the petitioner is acting unreasonably having regard to offers made to him to purchase his shares, and that the breakdown is due to the petitioner's misconduct and mismanagement of the affairs of the company.

11. Mr. E.R. Knight one of the directors of the company alleges that the only rental equipment sold by the company since January 1985 was sold by the petitioner to Frank's Oilfield Services (H.K.) Ltd. without the authority of the other directors. The purchase price of US$90,000.00 was paid to Rut1edge Oi1field Service and Supplies Pty. Ltd. a company contro11ed by the petitioner. This sum has not been paid to the company. No reference was made to this transaction by the petitioner.

12. Mr. Mc1nnes who appeared for the Official Receiver took a neutral stance in respect of the application.

13. Essentially the petitioner seeks to have the bank account in Hong Kong protected. However, the appointment of a provisional 1iquidator would instead effectively para1yse the company, and this would continue to the date of the hearing of the petition which is unlikely to be until June or July. There is no evidence to indicate that the company is insolvent. On the contrary it is pleaded that there will be a surplus for distribution if the company is wound up.

14. The present evidence reveals a prima facie case for a winding up order, but it is by no means a strong one. The assets of the company have not been shown by the petitioner to be in jeopardy. I do not consider that the evidence justifies the fears that have been experienced by the petitioner. In my judgment the petitioner has failed to establish that a provisional 1iquidator should be appointed. Accordingly the application is dismissed with costs.