XCHRX ADONIS IP KAI KWONG v. CITIBANK OVERSEAS INVESTMENT CORPORATION AND ANOTHER

HCCW 328/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP NO. 328 OF 2001

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J U D G M E N T

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1. This is an application by originating summons issued on behalf of the liquidator of a company for an order that the creditors' voluntary winding-up of the Company be stayed permanently. This is an application under Section 209(1) of the Companies Ordinance which provides that the court may, at any time after an order for winding-up on an application of the liquidator or other persons and on proof to the satisfaction of the court that all proceedings in relation to the winding-up ought to be stayed, make an order staying the proceedings either altogether or for a limited time on such terms and conditions as the court thinks fit. Under Section 259(1) of the Companies Ordinance, Section 209(1) can be applied to a voluntary winding-up and not only to a compulsory winding-up.

2. The papers in this case show a very clear case. Consequently, even though this is the first hearing of an originating summons, Order 28 Rule 4 permits the court to make the declaration sought, notwithstanding the fact that this is only the first hearing in chambers.

3. The Company in question is Citicorp Investment Services Limited. On 23 November 2000, with a view to putting the Company into members' voluntary winding-up, the two directors of the Company made a declaration of solvency pursuant to Section 232 of the Companies Ordinance. Consequently, there was an extraordinary general meeting of the Company at which resolutions were passed that the Company be wound up voluntarily and that Mr Ip be appointed liquidator for the purpose of the winding-up.

4. However, the extraordinary general meeting was held on 29 December 2000 which was 5 weeks and 2 days following the declaration of solvency. Consequently, the members' voluntary winding-up intended could not proceed by virtue of the fact that Section 233 (2)(a) provides for a period of 5 weeks only.

5. This matter was made known to the liquidator in due course and consequently the liquidator is asking for a stay of the creditors' voluntary winding-up which has come into effect by reason of the failure to produce a declaration of solvency within the time limit of 5 weeks.

6. In Re Calgary and Edmonton Land Company Limited [1975] 1 WLR 355, it was clearly held that the court can exercise its power under Section 209 on such terms as it thinks fit. The test is whether it would be just and beneficial to do so. The burden is cast upon the applicant, in this case, the liquidator, to make out a sufficient case for a stay.

7. In considering whether the court should make such an order, I have considered the following matters. First of all, I have considered the position of the shareholders of the Company. In the present case there are only two shareholders of the Company, being Citibank Overseas Investment Corporation and Citi (Nominees) Limited, and both have indicated that they have no objection to the liquidator's application.

8. I have also considered the position of the creditors. There would appear to be no creditors in this case, and the unaudited balance sheet of the Company as at 31 March 2001 shows that clearly the Company has more than adequate assets to discharge the possible accounts payable of US$3,930.00 which are auditors' fees which have not yet been invoiced.

9. Thirdly, the Official Receiver has indicated that he has no objection to the application. There are no public interests involved such that the court should not exercise its discretion in favour of a stay, and of course, this is the application of the liquidator and consequently the liquidator is in favour of a stay of the creditors' voluntary winding-up which has occurred simply as a result of the inadvertent missing of the 5 weeks statutory time limit.

10. Consequently, I will make an order that the creditors' voluntary winding-up of the Company be stayed permanently. There being no objection, I will also order that the costs of the application be paid by the Company.