RE: OCEAN CHINA INTERNATIONAL LTD

HCCW 757/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP NO. 757 OF 2003

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D E C I S I O N

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1. This is an application by Ocean China International Limited ("the Company") for an order under section 182 of the Companies Ordinance, Cap. 32, that in the event of the Company being wound up, no payment made into or out of the bank account of the Company with the Hong Kong and Shanghai Banking Corporation in the ordinary course of business from the date of the summons on 26 February 2004 shall be avoided. The petition was presented by a contributory on 14 July 2003, seeking a winding-up order, alternatively buy-out relief under section 168(A).

2. It is not in dispute that the Company is solvent, nor is it in contention that the Company has been carrying on business since the presentation of the petition and that it has incurred operating expenses. It is also accepted by the petitioner that it will be advantageous to both creditors and contributories that the Company should continue to carry on business. The business of the Company is that of a shipping agent.

3. The scope of the dispute relates to the details of the validation order to be made and is a narrow one.

4. The payments that the Company would wish to validate relate to (1) operating expenses incurred from 1 August 2003 to 21 October 2003 in the sum of HK$803,369.51; (2) monthly expenses since November 2003 of HK$145,799.80 on average; and (3) outstanding disbursements due to Shanghai Ocean Shipping Agency of US$20,723.58. There is no dispute as to the first and the third categories of the expenses.

5. The only dispute is in relation to the second category. Having studied the supporting documents, the petitioner challenges the amount of three items in the total sum of HK$33,121.13 and proposes that the monthly expenses should be limited to HK$120,000.00 only.

6. It is contended by the Company that the court should not set a limit as to the monthly expenses to be incurred in the ordinary course of business.

7. I see no reason why not or why this may be unworkable in this instance. I am mindful of the fact that there may be fluctuations in the expenses from month to month. It is for the Company as the applicant to work out the average expenses over a reasonable period of time and provide a suitable explanation in respect of those items queried by the petitioner. The Company regrettably has not provided any or any proper explanation in respect of the items queried.

8. I am not inclined to approve the draft order which merely states that payments into or out of the specified bank account in the ordinary course of business shall not be avoided under section 182. I would specify the amounts proposed to be validated and in respect of the monthly expenses I propose to adopt a more generous figure than that suggested by the petitioner and allow half of amount claimed to be incurred for those three items in dispute. I would cap the monthly expenses at HK$130,000.00.

9. The petitioner in turn seeks to validate two payments he claims are due to him from the Company. The first is the judgment debt of HK$153,802.74 being the award made by the Labour Tribunal in the petitioner's favour. The liability to pay the judgment debt is not disputed by the Company. The other sum is for HK$72,716.65, this amount is in dispute. It is alleged by the Company that this sum was only arrived at tentatively, after taking into account the advance payments made by the Company to the petitioner including a sum of US$30,000.00. As the latter amount is the subject of dispute in the petition and in the event that the petitioner should be held liable to repay the same to the Company, the Company will set off this amount against any money that may be due to the petitioner. In the circumstances, I do not propose to make any validation order in respect of HK$72,716.65.

10. I make a validation order in respect of the following amounts in the ordinary course of business of the Company and they should be set out specifically in the draft order submitted for the approval of the court:

(1) HK$803,369.51 being operating expenses from 1 August 2003 to 21 October 2003;

(2) HK$130,000.00 a month being operating expenses since November 2003 until the further order of the court;

(3) US$20,723.58 being disbursements due to Shanghai Ocean Shipping Agency; and

(4) HK$153,802.74 being an award made by the Labour Tribunal in favour of the petitioner.

11. I order that the costs of the application be in the cause of the petition.