RE KING FUNG CONSTRUCTION WORK CO LTD (“the Company”)

HCCW 829/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 829 OF 2004

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D E C I S I O N

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1.  This is an application of King Fung Construction Work Co. Ltd (“the Company”) for a validation order under section 182 of the Companies Ordinance, Cap 32.  The order sought is to validate payments made into and out of the bank account of the Company in the ordinary course of business.  Specifically, the payments to be made are to cover the office expenses of the Company from August 2004 to October 2004 and the expenditure in respect of two construction projects undertaken by the Company at Hang Hau and West Kowloon from August 2004 to April 2005.  I understand the office expenses of only 3 months are sought to be validated, as the Company has subcontracted the construction project in West Kowloon from November 2004 onwards and the subcontracting fee agreed to be paid to the Company would include the office expenditure of the Company.

2.  The petition herein was presented under section 177(1)(f) and section 168A of Cap 32 by a minority shareholder, Yip Kwai Chor.  There is no allegation that the Company is insolvent.

3.  The Company was incorporated in March 2002 and commenced trading in June 2002.  The main business activity is construction engineering work in the form of subcontracting of building plank moulds.

4.  The Company has disclosed the audited account and all the unaudited management accounts.  On the available material, I am satisfied that the Company is solvent and that it is in the interest of the creditors that it should continue trading.

5.  An estimate was given by the majority shareholder and director Lau Kai Yan of the estimated expenses and income from the projects still to be completed by the Company at the time of his affirmations.

6.  The only objection raised by the petitioner in his affirmation is that Mr Lau has not exhibited supporting documents to prove the outgoings incurred in the ordinary course of business, such as vouchers, payrolls, accounts, work passes of the construction sites, list of workers approved by the principal contractor and the like.  He asserted that the estimates given by Mr Lau are “grossly excessive”.  He also attacked a payment made in the past by the Company to a staff, as an example that Mr Lau has inflated the expenses.  I see nothing in this.

7.  The position of the petitioner would be sufficiently protected by an undertaking of the directors of the Company to give him information on the payments made on a regular basis and to provide him with the means of monitoring the payments.  This form of undertaking has been made in a number of cases.

8.  The Company has informed me that it is willing to provide an undertaking in these terms:

“The Company by its directors do undertake

(1)    to provide to the petitioner’s solicitors, until the further order of the court, a schedule on the 1^st, the 11^th and 21^st day of every month, the first schedule to be provided on 21 December 2004, giving details of all payments made out of the Company’s bank account in the preceding period, stating in respect of each payment the date, amount, payee, purpose of payment, identifying each payee by the name and address, and listing out the supporting documents to justify each payment; and

(2)    to permit the petitioner to inspect, on 3 working days’ notice, all existing documents supporting or evidencing payments made out of the  Company’s bank account pursuant to the order herein.”

9.  On the basis of the above undertaking provided by the Company, I make an order in terms of paragraph 1 of the summons issued by the Company on 1 September 2004.

10.  I order the costs of this application up to the filing of the 4^th affirmation of Lau Kai Yan on 21 October 2004 to be costs in the cause of the petition.  As for the costs of today, I see no reason why the costs should not be to the Company in any event.  It was only yesterday that the petitioner indicated for the first time that he would not oppose the Company’s application for a validation order upon the proposed undertakings.