RE BEAUTIFUL CORPORATION LTD (In Liquidation)

HCCW 732/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 732 OF 2003

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DECISION ON COSTS

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1. On 29 August 2003, I made an order for the appointment of provisional liquidators of Beautiful Corporation Ltd ("the Company") for the reasons I gave in my decision on that day. The application was made ex parte on notice by the petitioner, Miss Chan Yuen Fung Dawn. She had applied earlier for the appointment of provisional liquidators on 10 July 2003. No order was made on that occasion upon an undertaking given to the court by the opposing contributory, Ms Hua Thieu Man Jeannie, in the terms as set out in paragraph 2 of my decision on 29 August 2003. When the petitioner successfully obtained an order for the appointment of provisional liquidators on her 2nd application, I ordered that the costs of the petitioner and of the Official Receiver including the costs of and incidental to that application be reserved until the determination of the petition.

2. The winding-up petition first came before me on 25 August 2003. I gave directions for the filing of evidence and adjourned it to 29 September 2003. Ms Hua filed an affirmation in opposition on 15 September 2003, denying the allegation in the petition that a debt was due to the petitioner but stating that she would concur to the Company being wound up as she was unable to cooperate with the petitioner, who is the other shareholder and director, in running the business of the Company. I should mention that the Company had not been trading for several months and would appear to be insolvent. There was one supporting creditor who is a former employee. At the adjourned hearing of the petition on 29 September 2003, Reyes J made an order to wind up the Company on the petitioner's petition.

3. The petitioner now seeks an order that the costs of her 2nd application for the appointment of provisional liquidators should be borne by Ms Hua instead of being paid out of the assets of the Company.

4. The Official Receiver has been notified of the present application and has written to the court seeking to be excused from attendance in the interest of saving costs. The Official Receiver in his letter seeks an order that his costs be assessed in the sum of HK$16,650.00 or such other sum as the court may assess, and be paid by Ms Hua or out of the assets of the Company as court sees fit.

5. The grounds of the petitioner in seeking costs against Ms Hua may be stated as follows.

6. It is asserted by the petitioner that the 2nd application was necessitated because of the conduct of Ms Hua after the 1st application on 10 July 2003. Specifically, she had failed to comply with the undertaking to the court to make full disclosure of all the Company's assets in her possession and the movement of the assets from 13 May 2003 to the date of the order and that she was not cooperative in the disposal of the perishable stock of the Company. These matters were considered in my decision on 29 August 2003 at paras. 3, 4, 8 to 13. In arriving at the decision that provisional liquidators should be appointed, I was satisfied that it was appropriate that an independent person should be appointed to take possession of the perishable stock of the Company and deal properly with any claims that might be made by customers in respect of these goods.

7. Mr Paul Leung who appeared for Ms Hua on this application submitted that the 2nd application was not opposed by Ms Hua in that it was made ex parte on notice. Although the hearing was attended by Ms Hua's solicitors, no submissions were made by them on that occasion, notwithstanding the earlier indication in the letter of Ms Hua's solicitors to the petitioner's solicitors dated 11 August 2003 that she would oppose the appointment of provisional liquidators.

8. On 10 July 2003, when I made no order for the appointment of provisional liquidators on the 1st application, I ordered the costs of that application to be in the cause of the petition. I note Ms Hua's stance on the 2nd application that she did not in effect oppose it, but was the application necessitated because of any unreasonable position taken by her or was it due to her failure to fully disclose the matters she was ordered to disclose in the order made on 10 July 2003?

9. I was taken by both parties to the affirmation of Ms Hua filed on 31 July 2003. In my view, that affirmation is not in compliance with the order for disclosure made on 10 July 2003. It did not give an account of the movement of assets of the Company from 13 May 2003 to the date of the order in respect of the goods moved to Ms Hua's residence. It was contended by Ms Hua's solicitors in their letter dated 11 August 2003 that such movement of goods was outside the ambit of the order. I disagree.

10. I would also mention that the petitioner has adduced evidence before the court of five customers who have denied that they have received goods from Ms Hua in exchange for their refund of money. This is not disputed by Ms Hua.

11. It is incumbent on her to give a full account of the goods moved to her residence whether allegedly for disposing of these goods to customers in exchange of their refund of money or otherwise.

12. Further, I consider that Ms Hua had adopted an unreasonable stance in failing to cooperate with the petitioner in disposing of the perishable stock. Since late June 2003, Ms Hua had been trying to find a buyer for goods and equipment of the Company. She had not been successful, at least no prospective buyer had come forward with a price acceptable to both parties.

13. Subsequent to the 1st application for appointment of provisional liquidators and on 10 July 2003, I am given to understand by Mr Douglas Lam who appeared for the petitioner on that occasion and in the subsequent hearings that there was an agreement in principle between counsel that the perishable goods would be disposed of by auction.

14. By letter dated 15 July 2003, the petitioner's solicitors set out their detailed proposals for disposing of the goods by auction. This was followed up by their letter to Ms Hua's solicitors dated 7 August 2003. In the reply of Ms Hua's solicitors dated 11 August 2003, she retracted from her previous position. It was stated in that letter that she would only agree to dispose of goods with an expiry of shelf life in the coming six months. Further, the goods were to be disposed of by private treaty not by auction and at a reasonable price to be agreed.

15. It seems to me that Ms Hua should have recognized that in view of the limited shelf life of the perishable goods and the lack of success in finding a suitable buyer by private treaty for nearly two months, disposal by auction or public tender would be the only viable alternative and she should not have held out against disposal of the perishable stock by this method.

16. I accept the submission of the petitioner that the 2nd application for appointment of provisional liquidators was attributable to a material extent to the conduct of Ms Hua in not making full disclosure and her failure to cooperate fully with the petitioner in disposing of the perishable goods.

17. In the circumstances, it is appropriate that she should bear the costs of and occasioned by 2nd application.

18. The Official Receiver has given a breakdown of his costs. Of the amount sought in the sum of HK$16,650.00, only HK$7,200.00 is attributable to the costs incurred in the 2nd application. I have already ordered on 10 July 2003 that the costs of the 1st application are to be in the cause of the petition, so they should come out of the assets of the Company.

19. I make the following orders as to costs:

(1)	the costs of the petitioner of and occasioned by the application for the appointment of provisional liquidators on 29 August 2003, including the hearing of today, are to be borne by the opposing contributory Ms Hua, to be taxed if not agreed;
(2)	the costs of the Official Receiver of and occasioned by the application for the appointment of provisional liquidators on 10 July 2003 are assessed at HK$9,450.00 and to be paid out of the assets of the Company; and
(3)	the costs of the Official Receiver of and occasioned by the application for appointment of provisional liquidators on 29 August 2003 are assessed at HK$7,200.00 and to be borne by Ms Hua.