CHAN YU HONG v. LAM HONG AND OTHERS

HCCW 90/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 90 OF 2005

____________

____________

_____________

D E C I S I O N

_____________

1.  I have before me an application made by Smart Win Shipping (HK) Limited (“the Company”) for a validation order under section 182 of the Companies Ordinance, Cap. 32.  The Company seeks an order that no payment made from the date of the presentation of the petition being 31 January 2005 to the date of the hearing of the petition or further order into or out of the bank accounts of the Company with HSBC in the ordinary course of business shall be avoided by section 182.

2.  The petition was presented by a shareholder, Chan Yu Hong, seeking relief under Section 168A and for winding up on the just and equitable ground.  It would appear from the evidence before the court that the Company is solvent and has been trading profitably.  The Company is engaged in the business of a logistics and forwarding agent, and has been doing so since its incorporation in January 2000.  From the audited accounts of the Company for the financial year ended 31 March 2004, it would appear that the Company had net assets of HK$3.3 million odd with a turnover of over HK$60 million odd.  I have also the management accounts of the Company for the 9 months ended 31 December 2004 showing net assets of HK$4.1 million.  The Company has also produced bank statements as at 31 December 2004 with cash balances of over HK$2.4 million.  

3.  The Official Receiver has no objection to this application as this is a shareholders’ dispute and there is no indication that the Company is insolvent.  As for the petitioner, he does not oppose in principle a validation order but has asked the court to impose a limit of withdrawal from the bank accounts capped at HK$800,000.00 a month.  The petitioner stated that it was within his knowledge that expenses should not exceed that figure.  However, he has not produced any or any cogent evidence to back up his assertion.

4.  The Company has filed evidence to explain the amount of average expenses incurred a month in the ordinary course of business of the Company.  The figure came up to HK$3.8 million a month.  This was arrived at by taking the total cost of income from the figure in the management accounts of HK$30.6 million plus the total operating expenses of HK$3.4 million and dividing the aggregate by 9 to arrive at the monthly figure.  The cost of income figure was made up of outward freight expenses.

5.  I have compared the figures in the management accounts with the figures in the audited accounts of the Company for the financial years ended March 2003 and March 2004.  It seems to me that the figures in the management accounts are on a par with the figures in the audited accounts.  I see no reason not to accept the Company’s evidence in this respect that the average expenses per month in the ordinary course of business would be in the region of HK$3.8 million.

6.  I am satisfied this is an appropriate case to make a validation order and I will do so subject to the following conditions:

(i)	the total withdrawals from the Company’s bank accounts are to be capped at HK$4 million a month;
(ii)	the Company is to provide, until further order of the court, the petitioner’s solicitors with a weekly schedule on each Monday identifying in relation to the preceding week, the date, amount, payee and purpose of each payment made out of the Company’s bank accounts, and identifying each payee by name and address; and
(iii)	the petitioner is to be permitted to inspect on 3 working days’ notice all existing documents supporting or evidencing each payment out of the Company’s bank accounts.

7.  I should also mention that I have the undertaking of the Company’s counsel that the Company would abide by the conditions imposed.

8.  As for the costs of this application, I order that the costs be in the cause of the petition.