RE GLOBAL LOGISTICS MANAGEMENT LTD

HCCW 356/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 356 OF 2008

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J U D G M E N T

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1.  This is a creditor’s petition to wind up Global Logistics Management Limited (“the Company”).  The petitioner is CTO (H.K.) Limited, which is itself in liquidation, so the petition was presented by the liquidators of the petitioner on its behalf.

2.  On 9 July 2008, the liquidators served a demand on the Company under section 178(1)(a) of the Companies Ordinance, Cap. 32, claiming €160,333.28 and HK$4,050,000 being money payable by the Company to the petitioner as money advanced and/or lent by the petitioner to the Company, alternatively as money had and received by the Company to the petitioner’s use or benefit.  This petition was presented on 8 August 2008.

3.  The Company opposed the petition on two broad grounds.  Firstly, it was contended that insofar as the claim is for money had and received by the Company to the petitioner’s use or benefit, this cannot be the basis of a statutory of demand and cannot found a petition on the ground that the Company is unable to pay its debts.  Secondly, it was contended that there is a bona fide dispute of the petition debt on substantial grounds.

4.  I will first relate the relevant background matters.

The background

5.  The petitioner was incorporated in Hong Kong and was engaged in the business of freight forwarding.  Prior to 5 July 2006, all but one of the issued shares in the petitioner was owned by the Company, and the directors were Francesco S Uria and Ms Cheung Wing Yee.  Mr Uria is an Italian and ordinarily resides in Italy.  After 5 July 2006, all the issued shares of the petitioner were held by the Company and Mr Uria was the only director of the petitioner.

6.  Judgment was entered against the petitioner in the High Court on 19 July 2006 in the sum of HK$6.6 million odd.  The judgment creditors presented a petition to wind up the petitioner in September 2006 in HCCW No. 535 of 2006. The petitioner was ordered to be wound up on 7 May 2007 and the liquidators were appointed for the petitioner on 22 February 2008.

7.  In the statement of affairs of the petitioner submitted by Mr Uria on 11 September 2007, it was stated that the petitioner had a deficiency of HK$3.8 million odd, and there was only one creditor of the petitioner being the Company.  The nature of the petitioner’s liability to the Company was stated to be a loan and the amount owing to the Company as of 7 May 2007 was HK$879,254.

8.  The Company was also incorporated in Hong Kong.  Its issued and paid-up share capital is HK$2.  The sole shareholder and director of the Company is Eurofun Management Limited (“Eurofun”), a company incorporated in the British Virgin Islands.  Eurofun is beneficially owned by Mr Uria.

9.  There is no information on the evidence before me what business, if any, was carried on by the Company.

10.  After the liquidators were appointed for the petitioner, they wrote to Mr Uria, Ms Cheung and the solicitors acting for the directors seeking accounts, records, vouchers and documents of the petitioner.  The accounts and records were supplied to the liquidators in August and September 2007, but not all of the invoices and vouchers, as appeared from letter of the liquidators to the directors’ solicitors dated 11 October 2007.

11.  The liquidatorsexamined the accounting records they were supplied with.  They identified from the records fourteen payments made by the petitioner to the Company between 19 January 2005 and 4 October 2005 in the total amounts of €160,333.28 and HK$4,050,000 and demanded repayment of these sums from the Company.  The individual amounts were set out in the statutory demand.

12.  Mr Uria made one affirmation behalf of the Company.  He deposed that from time to time, the Company would provide advances and/or finances to support the operations of the petitioner as a freight forwarder and from time to time, the petitioner would repay the Company once the petitioner had sufficient cash in the bank accounts.  An account ledger entitled “Current Account – Global Logistics Management Limited” (“the Current Account”) was used in the petitioner’s accounting system to keep track of the movement of funds between the petitioner and the Company.

13.  Mr Uria’s affirmation is the only affirmation filed on behalf of the Company.  He adduced documents and records only of the petitioner.  He has not adduced any documents or records of the Company.

14.  I turn to the two broad grounds of opposition in the submission of Mr Richard Leung, who appeared for the Company.

Money had and received by the Company

15.  The liquidators have no personal knowledge how the amounts claimed came to be due and owing from the Company to the petitioner.  Having considered the accounting records available to them, it is understandable that the liquidators have put the claim on the basis of money advanced and/or lent by the petitioner to the Company, alternatively as money had and received by the Company to the petitioner’s use or benefit.

16.  Mr Leung submitted that a claim for monies had and received cannot be claimed as a debt in a statutory demand.  He contended that a statutory demand must be for a liquidated sum based on either contract or tort.  To the extent the statutory demand is for monies had and received, the statutory demand is defective and a winding-up petition based on such a statutory demand must also fail.

17.  I reject the submission that the liquidated sum claimed in the statutory demand must be based either on contract or tort.  I fail to see any rationale for confining the legal basis of the liquidated sum demanded to contract or tort.  Besides, it is just not the case that a creditor’s petition could only be brought on the basis of a liquidated demand arising out of contract or tort.  A ready example that springs to mind is a demand for legal costs which have been taxed or assessed.

18.  Mr Leung’s authority for his proposition is a sentence in Palmer’s Company Law, Vol 3, para 15.220, which reads: “… the creditor’s claim must be for a liquidated sum based upon contract or tort”.  The case mentioned in the footnote of this work for the sentence aforesaid is Re Humberstone Jersey Limited (1977) 74 LS Gaz 711 (31 August 1977, English Court of Appeal).  I have not been able to obtain a transcript of the judgment, or the brief report of the judgment in the Law Society Gazette.  This case was considered in TSB Bank plc v Platts [1998] 2 BCLC 1 and this is what the English Court of Appeal said:

“We were next referred to Re Humberstone Jersey Limited, a decision of this court on 24 January 1977 and only briefly reported in (1977) 74 LS Gaz 711.  We were supplied with a transcript.  In that case a supplier had supplied a manufacturing company with four machines on terms that they were to be installed within 30 days.  The installation was not completed for another six months and the company claimed damages for breach of contract.  The supplier served a statutory demand on the company for the cost of the machines and petitioned on the basis of that debt.  This court held that because of the unquantified claim by the company for damages, the supplier could not rely on the statutory demand.  In the circumstances of that case it was not possible to say there was any quantified sum due.  As Scarman LJ said, it was possible that nothing was owed.  That does not assist Mr Mortimore.”

19.  As apparent from the above, the important thing is a demand for a quantified sum.  The demand may be usually based on contract or tort.  But I see no reason for confining the legal basis to contract or tort, and excluding, for instance, a claim based on quasi-contract.

20.  It is also convenient to mention here another argument advanced by Mr Leung, that the petitioner’s claim is “mired in uncertainty” as the liquidators have advanced “two alternative hypotheses as to the legal basis” for the petitioner’s claim, that the liquidators have not provided particulars of any alleged loan, such as the identities of parties to the loan agreement, when the loan agreement was made, the material terms of the alleged loan or loans.  Mr Leung submitted that the liquidators have not produced “a shred of evidence” on these “critical matters”.

21.  I see no valid reason why a claim could not be made on the basis of a loan, alternatively for money had and received.  Provided that the fact of payment is established, and there is clear liability to make repayment, I do not think it matters that the claim is put on two alternative bases.

22.  No dispute was raised in Mr Uria’s affirmation of the fourteen payments made by the petitioner to the Company.  These payments featured in the account ledger of the petitioner and the summary of movements of funds between the two companies exhibited to his affirmation.

23.  The only question that remains is whether there is liability to make repayment.

If there is a bona fide dispute of the debt on substantial grounds

24.  The Company’s position is that funds were transferred back and forth between the petitioner and the Company.  It was alleged that at the end of the day, as at 30 September 2006, taking into account all the debits and credits in the Current Account, it was the petitioner that was indebted to the Company, and the petitioner’s debt to the Company was HK$979,254.28.  In support of this allegation, the Company relied on a confirmation for audit purposes of the petitioner’s auditors dated 7 September 2005, which stated that the Company’s account with the petitioner as at 31 December 2004 (the date to which the last audited accounts were prepared) showed HK$5,722,998.96 was due from the petitioner to the Company and this was confirmed by the Company.  For the period from 1 January 2005 to 30 September 2006, the Company produced the account ledger of the petitioner showing the movements of funds between the two companies over that period, ending in a balance of HK$979,254.28 due to the Company.

25.  The liquidators made these points regarding the accounting records of the petitioner relied on by the Company:

(1)  The confirmation for audit purposes of the petitioner’s auditors regarding the amount allegedly due from the petitioner to the Company of HK$5,722,998.96 as at 31 December 2004 is of no or little evidential value, as both companies were controlled by Mr Uria.  The liquidators have found no supporting documents for the amount allegedly due as at 31 December 2004, nor did Mr Uria provide any other supporting documents or any information regarding the details or breakdown of the sum of HK$5,722,998.96.

(2)  According to Mr Uria’s affirmation, the Company would provide advances and/or finances to support the operations of the petitioner from time to time, and the petitioner would repay the Company once the petitioner had sufficient cash in the bank accounts.  However, from the account ledger of the petitioner produced by Mr Uria, it would appear that starting from 13 September 2005, the petitioner had fully paid the outstanding balance due to the Company, but the petitioner still continued to remit monies to the Company, so that on 6 December 2005, the ledger showed the Company owed the petitioner HK$2,647,152.17.

(3)  There were two transactions both dated 31 December 2005 of HK$211,064.18 and HK$1,890,048.37 entered in the ledger of the petitioner of voucher numbered “OTHER0501684” and described as “ABSOR OF UNKNOWN PAY/REC”.  These two transactions had been entered in the Current Account to set off a total of HK$2,101,112.55 due by the Company to the petitioner.  The vouchers of these two transactions were not supplied to the liquidators.  Furthermore, the cover of the vouchers of the petitioner for the year ended 31 December 2005 showed that the vouchers were only up to voucher numbered “OTHER0501682”.  There was no supporting document for these two transactions.  If these two transactions were ignored, there would be a balance owed by the Company to the petitioner of HK$1,121,858.27 (HK$211,064.18 + HK$1,890,048.37 – HK$979,254.28).

(4)  There were other transactions recorded in the Current Account that were dubious or had no supporting documents.  Examples were:

(i)  the transaction dated 1 January 2005 which recorded that the petitioner “sold of 45% of CTO (Italia) SrL share at cost” at HK$339,127.01

The liquidators have checked the voucher and noted no supporting documents or other description for this transaction.

(ii)  the transaction dated 11 March 2005 which recorded that the petitioner owed the Company €154,484.99

According to the supporting voucher, this amount was the statement balance due by the petitioner to CTO (Italia) SrL.  There was no document to support the transfer of balance between the petitioner and CTO (Italia) SrL.

(iii)  the transaction dated 17 October 2005 which recorded that the petitioner owed  the Company US$130,000

According to the supporting voucher, this amount should have been received from JV-CINAKO, not the Company.  There was also no supporting document to show why an amount received from JV-CINAKO should be treated as an amount received from the Company.

(5)  Last but not least, not a single document from the records of the Company was produced in support of the amounts which the Company alleged were owing from the petitioner to the Company.

26.  These queries of the liquidators are entirely proper.  Mr Uria has not sought to answer them.

27.  The position is not as put by Mr Leung, that the liquidators are contending that the debit column in the Current Account of the petitioner is entirely accurate and the credit column is to be disbelieved.  As it would appear from the above, the liquidators have also queried a transaction in the debit column, being the transaction dated 1 January 2005.  Also, it would appear from the individual amounts set out in the statutory demand that claims are made by the liquidators only of some of the amounts in the debit column.

28.  Mr Leung further submitted that as a matter of business reality and common sense, it was inherently more probable for the Company as a parent company to provide financial support to the petitioner instead of the other way round.  I have no basis to draw that inference.  No information is provided to this court of the financial standing of the Company at the material time.  Nothing is known about the Company other than the fact that it has a paid-up share capital of HK$2.

29.  The onus is on the Company to adduce sufficiently precise factual evidence to satisfy the court it has a bona fide dispute on substantial grounds.  The Company has failed to do so.

30.  In the circumstances, I order the Company to be wound up.  The costs of the petitioner are to be paid out of the Company’s assets.