RE FANCY OCEAN LTD

HCCW 35/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 35 OF 2012

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J U D G M E N T

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1.  This is the hearing of a creditor’s petition for the winding‑up of Fancy Ocean Limited (“the Company”) on the ground that the Company is unable to pay its debts. The petitioner, Mr. Willem Diederik Mak Van Waay (“the Petitioner”), has however failed today to appear in support of the Petition. The only party who appears is Ms Saskia Dijkstra (“Ms Dijkstra”). She has given notice dated 17 April 2012 to appear to oppose the Petition. She has also filed evidence in opposition of the Petition on the basis that the debts on which the Petition is founded are bona fide disputed on substantial grounds. She is today represented by Ms Lam. Having heard Ms Lam, I ordered that the Petition be dismissed with costs to Ms Dijkstra. I indicated that I will give reasons later, which I now do.

The Petitioner’s absence

2.  As indicated above, the Petitioner has failed to appear before the court in support of the Petition. That was so despite a Notice of Hearing having been issued to his then solicitors.  Ms Lam invited me to dismiss the Petition on this basis alone.  I have not been shown any authority in support of that invitation.  In general, where the petitioner is a creditor, the right to a winding-up is in effect a class right.  I note also Rule 33 of the Companies (Winding-Up) Rules.  Although there are no other parties who appear before me and seek to be substituted as the petitioner, Rule 33 does indicate that the failure on the part of the original petitioner to appear in support of his petition is not necessarily the end of the petition.  I am reluctant to dismiss the Petition on the sole ground of the Petitioner’s absence.

3.  Ms Lam said in any event she was happy to go into the merits of the matter to show that the Petition should be dismissed on the basis that the alleged debts which founded the Petition are bona fide disputed on substantial grounds.  She adopted her written submissions filed for that purpose.  She then highlighted some aspects of her written submissions for my consideration.

The legal principles

4.  The legal principles concerned are clear: if there is a bona fide and substantial dispute as to the debt, it should be litigated in an action, and not on the hearing of a petition for winding‑up.  In such a case, as a matter of practice, the court would not embark on a trial to determine the validity of a debt.  Such a petition would be dismissed.  The burden is on the company or the party seeking to raise the matter to demonstrate that there is a bona fide dispute on substantial grounds.

The Petitioner, Ms Dijkstra and the Company

5.  The Petitioner and Ms Dijkstra are husband and wife.  They were married in 2003.  They are currently undergoing divorce proceedings in Holland.

6.  The Company was incorporated in Hong Kong in 2006.  The Petitioner and Ms Dijkstra have been its only directors.  Until about March 2011, they each held one of the only two issued shares in it.  Then in March 2011, in circumstances disputed by the parties, the Petitioner caused the share he beneficially held to be transferred to Ms Dijkstra.  She has, according to her and on papers, since then been the 100% beneficial owner of all shares in the Company.

7.  Ms Dijkstra in her affidavit describes the Company as having primarily been used for investment holding purposes.  The Petitioner says that it was incorrect, but accepts nonetheless that it has over the years held a number of boats.  One of those boats was in fact used as their residential home.  The Company has quite clearly been closely connected to the matrimonial affairs of the Petitioner and Ms Dijkstra.

The debts on which the Petition is founded (“the alleged Debts”)

8.  The Petitioner claims that the Company owed him monies.  The alleged Debts are set out in the Schedule attached to the Petition (“the Schedule”).  The total sum is said to be €640,299.56.  That sum comprised 20 individual debts, which are said to have been made between November 2006 and December 2008. According to the descriptions on the Schedule, they were mostly if not all expenses relating to the vessels held by the Company.

9.  The Petitioner’s primary case is straightforward, that he was owed the alleged Debts by the Company, and it was unable to pay them.

The evidence and my analysis thereof

10.  Ms Dijkstra disputed that the alleged Debts were owed to the Petitioner.  Her position has been consistent.  Shortly after the Statutory Demand based upon the alleged Debts had been served upon the Company, she instructed her solicitors to write to the Petitioner’s then solicitors saying that the alleged Debts were “genuinely disputed on substantial grounds”.  Some reasons were set out therein.  The bases of her case are set out in greater detail in her affidavit filed on 22 May 2012.

11.  According to what she says in her affidavit, her primary position is that the alleged Debts were paid by her or with her money.  She says that in any event, upon the transfer of the beneficial ownership of the Petitioner’s share in the Company to her, it was the understanding between them that the Company would be free from debts, or in her words, “any and all possible debts owed to the petitioner (which I deny) were to be extinguished once and for all.  It would not have made sense to leave the Company exposed to any such Purported Debt upon the transfer having been executed.” 

12.  In order to make good her primary position, she has given in her affidavit quite some details on a lot of financial affairs between her and the Petitioner, some of which involving the Company.  For example, monies could be seen to have been directly transferred from the account of Ms Dijkstra’s employer company (or an account of a company connected to her employer company) to the Petitioner’s personal account in Holland.  Boats are said to have been purchased and maintained with her funds.  Loans are said to have been raised by her from her employer for the use and benefit of the Petitioner or the Company, the repayment of which having been exclusively borne by her.  In particular, bank statements have been produced showing that one of such loans, in the sum of €300,000, was deposited by Ms Dijkstra’s employer (or a company within the group) into the account of the Company, only then to be in part transferred out to the Petitioner’s personal account.

13.  Ms Dijkstra has also provided some evidence on her relationship with the Petitioner since the commencement of the divorce proceedings in Holland in April 2011. Their relationship has been acrimonious.  She says further that the Petitioner’s petition for divorce included a claim for shares in the Company and an amount of €640,000 allegedly owed by the Company to him, which was more or less the amount of the alleged Debts.  He has also started on 30 June 2011 a District Court action in Hong Kong against her for 50% of the shareholding in the Company based upon allegations of misrepresentation (this being the dispute in respect of the transfer of the Petitioner’s share in the Company mentioned in paragraph 6 above).  According to Ms Dijkstra, the Petitioner has taken no further action in that action after pleadings and after the filing of the timetabling questionnaires in about February 2012.

14.  Ms Dijkstra concludes her affidavit by saying that:

“It is unfortunate that the Petitioner has resorted to multiple legal proceedings in Holland and Hong Kong to seek his personal vendetta against me, and in this case, make use of this Honourable Court to place an artificial strain on the valuable assets of the Company (i.e. the vessels) when he knew full well that the Purported Debt is far from being an undisputed debt which is pending before the courts in Holland.”

15.  The Petitioner disputes Ms Dijkstra’s version.  In fact, most things are in dispute, including the identity of Ms Dijkstra’s employer.  He attacks Ms Dijkstra for having stolen his bank statements, and properties in excess of €400,000.   He comments most of her evidence as being irrelevant.  In respect of those transfers from her employer through the Company to his personal account, he said that some of them were transacted in that way in order to assist her to evade tax.  There are quite some details given in his affidavit in reply.  I will not repeat them all here, though I have considered them.

16.  He is able to produce some bank statements showing that the alleged Debts were payments originated from his personal account to the payees set out in the Schedule.  But as can be seen from some of the evidence summarized above, the money in his personal account might not necessarily all belong to him.

17.  I have considered one specific aspect of the evidence filed by the Petitioner which I regard to be of some significance:

(a)   At paragraph 43 of his 2^nd affidavit, he claims that:

“Ms Dijkstra complains that I had made claim in the Dutch divorce proceedings of the same debt that I am claiming in these proceedings against the Company. That is incorrect. Prior to the issue of these winding-up proceedings, I instructed my lawyers in the Netherlands to ensure that any claim that might be construed as having an element of duplication of the present claim be taken out of the equation in relation to the divorce proceedings. This was further confirmed in a Deed filed on my behalf in the divorce proceedings confirming that any claim made in those proceedings in relation to the loans made to the Company are only made conditionally so that those claims would only be made if the claims I made in respect of the loans in Hong Kong were to fail. There is now produced and shown to me marked Exhibit ‘WDMVW-7’ a true copy of an email from my Dutch lawyer to my Hong Kong solicitor confirming this and a copy of the document to the court.”

(b)   What his Dutch lawyer has said in that email are these:

“ [The Petitioner] has informed me that has (sic.) invested an amount of about €640,000 in the company Fancy Ocean Ltd, which should either be qualified as a loan, or as a private property which [the Petitioner] has invested in Fancy Ocean. (emphasis added)

          In the divorce proceedings…I requested compensation for this investment conditionally, therefore only if the said amount cannot be qualified as a loan in the Hong Kong Proceedings.”

(c)   What is apparent from that email is that even the Petitioner was, when giving instructions to his Dutch lawyer, not certain as to the nature of the alleged Debts.  According to him, they should either be loans or his private property invested in the Company.  If they were indeed investments, they might not have been loans, and could not have founded the present Petition.

(d)   The Petitioner chose not to appear to support his Petition.  I have had no assistance from him as to what he might have told his Dutch lawyer or their meaning.  On the face of documents, they stand in uncomfortable contrast to the apparently clear attitude he adopts in the present proceedings, that the Company has been indebted to him.

18.  The Petitioner and Ms Dijkstra have been married for nearly 10 years.  The financial affairs between them as a married couple are on evidence not straightforward.  The Company is not simply a limited company engaging in commercial activities.  It has also been used by the couple for their private affairs.  The transactions that were conducted through it on the evidence are many and varied.  Based on the plethora of factual disputes raised by the parties, I simply cannot at this stage determine what the nature of those transactions was.

19.  Can I, as apparently suggested by the Petitioner, single out the alleged Debts and conclude summarily that they are debts owed by the Company to him?  Based on the evidence, I cannot.  As highlighted above, even the Petitioner, at least when speaking to his Dutch lawyers about those alleged Debts, was not entirely certain. 

20.  On the other hand, the primary position maintained by Ms Dijkstra is not inherently improbable. Based on the evidence she has adduced, her version may be true.

21.  I do not need to rule on the matter.  This is not the right court.  But in the light of my analysis above, I find that Ms Dijkstra has discharged the necessary burden and satisfied the Court that the alleged Debts are bona fide disputed on substantial grounds.

Conclusion

22.  I accordingly dismiss the Petition.  I also order that costs of the Petition be to Ms Dijkstra. I was invited by Ms Lam to certify attendance of counsel as being proper.   I have considered the nature of the hearing.  I so certify.